I earn in USD but my home country has a different currency INR.
Pros of holding USD:
Converting to INR cost me 0.5% of the amount which I save by not converting.
USD/INR rate seems to be going up for decades.
More stable currency.
Pros of holding INR:
- Higher interest rate by bank/govt but there is also taxation on interest.
Let's assume the interest rate is consistent. Also, assume 0.5% is a fixed charge and will remain the same forever. Let's ignore geographical risk.
Now, I want to calculate which is more attractive currency. Our variables are:
0.5% fees (straight-forward)
Income taxation on interests on deposit (straight-forward too)
USD/INR exchange rate improvement over the years (how do I find the statistical mathematical value?)
Assuming I don't need the money anytime soon or want to invest in stocks, how do I put all these 3 variables in an equation to find more attractive currency?
Ultimately, I want to arrive at some conclusion like "There is 90% statistical chance that I will earn x% higher interest if I invest in y currency".