If the Federal Reserve decreases the money supply, interest rates will **increase** and the dollar will **appreciate** against other currencies.
This is because a decrease in the money supply makes it more difficult for businesses and consumers to borrow money. This, in turn, leads to lower levels of investment and spending, which slows down economic growth. As a result, interest rates tend to rise in order to attract investors and encourage saving.
A stronger dollar makes it more expensive for foreign buyers to purchase goods and services in the United States. This, in turn, leads to an increase in exports and a decrease in imports, which further boosts economic growth. As a result, the dollar tends to appreciate against other currencies when the money supply is decreased.
However, it is important to note that these are just general trends. The actual effects of a decrease in the money supply on interest rates and the dollar will depend on a variety of factors, including the state of the economy and the expectations of market participants.