I think the point is that when n is small, the dollar/pound spot price will change.
Imagine that current equilibrium position is as follows:
Return on n-year UK government bond : 5%
Return on n-year US government bond : 4%
Expected appreciation of $ against £ over n years : 1%
and so the equation in the Notes is satisfied. If n is small (ie we're considering only the short-term bonds), then the argument says that a rise in US interest rates rise is more likely to impact the exchange rate than it is UK interest rates. For example, a rise in US interest rates of 0.5% may not have an immediate impact on UK interest rates because the shock could be absorbed by the expected appreciation in the dollar. So the new position would be:
Return on n-year UK government bond : 5%
Return on n-year US government bond : 4.5%
Expected appreciation of $ against £ over n years : 0.5%
Remember that this equation only holds when the market is in equilibrium - the shock of the interest rate change would tend to cause an immediate appreciation in the dollar, but this would reduce the expectation of any future appreciation.