Higher interest rates would have two effects.

1. Some as you mentioned would close their positions fearing a loss on the dollar side of their carry trade position.

2. Others convinced that the dollar is dead with the passage of time would increase their position as they could get more for the dollars they sell.

It is not a one way deal.

I'm not in on the trade. I'm a minnow in the financial lake, but if I were a mighty muskellunge I'd be opting for position 2.

P.