interest rate parity investment & finance definition
A theory that says the differences in values of
currencies are directly related to the differences in short-term interest rates
of each of the countries.
See interest rate parity in Wall Street Words
The interrelationship between currency exchange forward rates and spot rates that result from interest rate differentials. If interest rates are higher in the United States than in a foreign country, the forward dollar value of the foreign currency will exceed the spot dollar value of the foreign currency.
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