# Should I hold strong currency with weaker interest rate or a weaker currency with high interest rate?

I earn in USD but my home country has a different currency INR.

Pros of holding USD:

1. Converting to INR cost me 0.5% of the amount which I save by not converting.

2. USD/INR rate seems to be going up for decades.

3. More stable currency.

Pros of holding INR:

1. 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:

1. 0.5% fees (straight-forward)

2. Income taxation on interests on deposit (straight-forward too)

3. 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".

• Side note - I'm pretty sure your USD interest is also taxable in India, although you might be required to self-report. Having a bank account outside your country rarely absolves you of tax requirements. Better to play by the book now, rather than get hit with penalty-type charges when you eventually repatriate the cash for your own needs in the future. Commented Mar 21, 2022 at 19:45
• @Grade'Eh'Bacon Yes, I am aware of that. But I probably won't have to pay any tax if USD/INR exchange rate increases since their is technically no interest. Commented Mar 21, 2022 at 19:50
• Interest doesn't cancel out foreign exchange losses directly. I'm not an India tax expert but I think you are oversimplifying something that has an impact on perspective. Commented Mar 21, 2022 at 20:03
• @Grade'Eh'Bacon I am not talking "cancel out foreign exchange losses" here. I am talking about something else completely different. But don't worry, I will take care of taxation part. Commented Mar 21, 2022 at 20:09