An interest rate differential is the difference in interest rate between two currencies in a pair. If one currency has an interest rate of 3 percent an the other has an interest rate of 1 percent, it has a 2 percent interest rate differential.
If you were to buy the currency that pays 3 percent against the currency the pays 1 percent, you would be paid on the difference with daily interest payments.
Tags: interest rate difference percent currency interest payments currencies paid
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