The currency risk premium can be basically defined as the extra yield demanded to cover the risk of depreciation in local currency against reserve currencies (Du et al. (2013)). Investors who want to hold local currency-denominated sovereign bonds ask for the rate on US Treasury bonds, an investment instrument that is deemed risk-free, and the credit risk premium that reflects the country’s default risk, in addition to the currency risk premium that they demand in return for a possible depreciation of the local currency against reserve currencies. In this regard, a country’s local currency sovereign bond yield can be decomposed into three components having the same maturity: the US treasury bond yield, the credit risk premium, and the currency risk premium. Based on this definition consistent with the academic literature, the currency risk premium (CRP) can be expressed as the residual obtained by excluding the US bond yield and credit default swap premium (CDS) from the local currency bond yield for a country.