Finance, Forex and Investments

How will a rise in interest-rate cause a rise in the exchange-rate?

I understand that a rise in interest rate will will cause the money supply in the economy to fall. But how will this cause a rise in exchange rate?

Public Comments

1. say USA has 2% interest rates and Australia 6%, investors will take their money from USA to Australia. To do that they have to buy A$ and sell US$ forcing up the A$ against the US$