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If uncovered interest parity holds O domestic and foreign interest rates will be equal the country that has the currency that is expected to increase

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If uncovered interest parity holds O domestic and foreign interest rates will be equal the country that has the currency that is expected to increase in value will have the higher nominal rate of interest The domestic currency will be expected to increase in value when domesti nominal interest rates are higher than foreign nominal interest rates the spot exchange rate e must be expected to fall when domestic nominal interest rates are less that foreign nominal interest rates

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