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A currency in which interest rates are lower than rates in the reference (domestic) currency. For many years, the yen and the Deutsche mark have been premium currencies with respect to many other world currencies. Interest rates in yen and D-marks were low relative to rates denominated in other currencies. Interest rates and exchange rates are kept in equilibrium by an arbitrage mechanism, but it may be useful to think of premium currencies as belonging to countries with relatively low expected inflation rates. See also Interest Rate Parity, Discount Currency.
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