Homework Answers
Thanks for your question !!
According to uncovered Interest Parity theory difference in interest rate between two countries equals the changes in exchange rate between two countries.
Formula for uncovered interest rate parity can be simply stated as below for better understanding,
Current exchange rate of domestic country(1+Domestic Interest rate) = {Expected exchange rate(1+time)}(1+ Foreign Interest Rate)
Form this equation we can see that, if we hold the interest rate constant then expected downfall/depreciation in currency will result in downfall/depreciation in currency today.
Hope this clarify your doubt.
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