Interest rate parity (IRP) governs the relationship between interest rates and foreign exchange rates. It plays a key role in foreign exchange markets.

Interest rate parity says there is no opportunity for interest rate arbitrage for investors of two different countries. But this requires perfect substitutability and the free flow of capital.

Furthermore, “Covered Interest Rate Parity” (CIP) refers to an equilibrium situation in the relationship between spot, forward and interest rate markets when no opportunity for forward ...

The interrelationship between interest rates, spot rates and foreign exchange rates in the currency markets. Interest rate parity is an economic theory that says that the difference between ...

Role Of Interest Rate-Exchange Rate Parity In Asset Allocation Nov. 26, 2013 10:10 AM ET UUP , UDN , INR , CYB , FXE , FXB , FXF , AGG , BZF 2 Comments KRV ...

As shown in Figure 1, real interest rates have been almost continuously negative since 2008, and excluding a brief rise in rates in 2004, have been almost monotonically negative since 2002.

“Sudden interest rate moves will hurt risk parity strategies if those sudden rate moves are preceded by periods of low-volatility environments,” said Samuel Lee, a Morningstar analyst.

The Ultimate Guide To Risk Parity And Rising Interest Rates. Apr. 30, 2016 3:07 AM ET GLD, IEF, SPY, TIP 11 Comments 1 Like. ... Rising interest rates are still a top concern for most investors.

A X-CCY Basis Index value near zero means that interest rate markets and FX markets are aligned in their expectations of forward FX prices. As of February 7, 2025, the X-CCY Basis Index was -0.49 ...

Dollar-euro exchange rate reaches parity The dollar has continued to strengthen against the euro, and for the first time in decades, the two currencies are worth about the same.