According to the theory of covered interest arbitrage,if the interest differential in favor of the foreign country exceeds the forward discount on the foreign currency,there will be a:

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When the interest differential in favor of the foreign country exceeds the forward discount on the foreign currency, investors will borrow in their home currency, convert it to the foreign currency to take advantage of the higher interest rates abroad, and then use the forward market to lock in a rate to convert back to their home currency in the future. This process results in a capital outflow from the investor's home country as funds are moved abroad to seek higher returns.

According to the Theory of Covered Interest Arbitrage,if the Interest