The level, slope, and curvature of the yield curve reflect time variation in investors’ risk premia and are known predictors of excess bond returns and economic activity. In this paper, I develop a term structure model under complete markets and no arbitrage to relate these interest rate factors to exchange rate fluctuations. The Gaussian properties of the stochastic discount factors imply non-linearities in exchange rate risk premia that are shown to account for up to half of the in-sample variation in one-year currency returns for different country pairs during the 1980s–2015 period. I find that interest rate factors help explain exchange rate fluctuations in and out of sample, particularly at longer horizons, and yield profitable currency portfolios relative to standard carry trade strategies.

收益率曲线的水平，斜率和曲率反映了投资者风险溢价的时间变化，是债券超额收益和经济活动的已知预测因子。在本文中，我建立了一个在完整市场下的期限结构模型，并且没有套利将这些利率因素与汇率波动相关联。随机贴现因子的高斯性质表明汇率风险溢价存在非线性，这表明在1980年代至2015年期间，不同国家/地区的一年期货币收益的样本内变化最多占一半。我发现利率因素有助于解释汇率在样本中和样本外的波动，特别是在更长的时期内，并且相对于标准套利交易策略可以产生有利可图的货币投资组合。