International Fisher Effect

This theory predicts that the spot foreign exchange rate will change over time to reflect and offset differences in interest rates in the respective currencies.

So for example, unhedged currency depreciation losses will on average negate and match exactly any gains on interest differentials between the two currencies.

See also

• Carry trade
• Depreciation
• Expectations theory
• Fisher Effect
• Four way equivalence model
• Interest rate parity
• International Fisher Effect
• Purchasing power parity
• Spot rate