interest rate differential (IRD)
The difference between the return achieved by depositing in one currency versus the money paid for borrowing in another. forex traders use the interest rate differential and the concept of interest parity to determine forward forex rates and to compute forex swaps. It also determines the amount that an investor using the Carry Trade can profit by if the exchange rate remains steady.
Browse by Subjects
forward exchange rate
interest rate differential (IRD)
Dollar Carry Trade
forward discount
uncovered interest arbitrage
See All Related Terms »

cash payment
capital gain
pegged currency
Fluctuation Limit