If a currency's forward price in US dollars is higher than the spot price, interest rates are higher in the foreign country than they are in the United States.

Question

Quizplus · Accepted Answer

When a currency's forward price in US dollars is higher than its spot price, it typically indicates that interest rates are lower in the foreign country compared to the United States, not higher. This is based on the interest rate parity theory, which suggests that differences in interest rates between two countries will be offset by changes in the spot and forward exchange rates between their currencies.

If a Currency's Forward Price in US Dollars Is Higher