The approximated-version of UIP is shown in the following diagram. The return from the dollar deposit is a straight line and does not depend on the current spot exchange rate Edollarieuro. On the other hand, the return from the euro deposit is decreasing in the current spot exchange rate Edolarleuro. The intuition is explained in the following box Expected retur Figure l: FX Market Return from the dollar deposit is Returh from the euro deposit le + - Esye Current spot exchange rate, Elariur The approximated-version of UIP is shown in the following diagram. The return from the dollar deposit is a straight line and does not depend on the current spot exchange rate Edollarieuro. On the other hand, the return from the euro deposit is decreasing in the current spot exchange rate Edolarleuro. The intuition is explained in the following box Expected retur Figure l: FX Market Return from the dollar deposit is Returh from the euro deposit le + - Esye Current spot exchange rate, Elariur