Note this concept of IRP relates to an interest rate FORWARD, this is a rate agreed today for forward delivery. The forward is priced under an arbitrage-free condition called interest rate parity. Under this condition, it considers being able to fund a deposit by borrowing in the lower interest rate currency and depositing in the higher interest rate currency, the forward is priced to avoid an arbitrage condition by locking in a forward to pay off the loan taken out to fund the deposit (a fully explained example exists in the Cognition videos):
Forward Var/Base = Spot Var/Base x ((1+r var) / (1+r base))
Where r is the de-annualised rate.
Under this condition the currency with the higher rate trades at a FORWARD discount
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