Does inflation/expected inflation in a given country devalue its currency or increase its value? I've seen both arguments. From my understanding an increase in the rate of inflation should decrease the value of the currency since it's by definition a depreciation in its purchasing power. But I've heard people argue that an increase in inflation actually increases the value of a currency since that country's Central Bank is expected to hike its rates which makes that country's financial assets more attractive and thus increases that country's currency value through an increase in the demand for that currency.

Which of these two views make more sense theoretically and which is more supported empirically?
I've seen both arguments. [...]


You are comparing two arguments that are not incompatible. The first one scenarizes a situation within which the CB does nothing, while the second argument implies a CB that counteracts. Note that when the CB hikes its rates, it also has some forex-unrelated domestic consequences going in the same direction.


  Which of these two views make more sense theoretically [...] ?


As explained, both. It is all about politics actually. There is no deterministic math here. Put differently, human is an unpredictable variable in the model.


  Which [...] is more supported empirically ?


Once again, both. Notorious investments such as Soros's against the British pound in 1992 perfectly illustrates the second argument. But if Britain hadn't done anything to keep the pound's value high (in relation to the German mark), it would have decreased because of inflation.