according to the international fisher effect (ife): the nominal rate of return on a foreign investment should be equal to the nominal rate of return on the domestic investment. the exchange rate–adjusted rate of return on a foreign investment should be equal to the interest rate on a local money market investment. the percentage change in the foreign spot exchange rate will be positive if the foreign interest rate is higher than the local interest rate. the percentage change in the foreign spot exchange rate will be negative if the foreign interest rate is lower than the local interest rate.
