Strategies in Forecasting Exchange Rate

Abstract

Forecasting exchange is a large industry. Almost 23 of the commercial services all over the world are now adopting different techniques in providing foreign exchange rate forecasts. The purpose of this work is to review the reason why is difficult to predict exchange rate and to critically evaluate the main methods available to predicting the future direction of exchange rates and asses their effectiveness in providing forecast of use to international companies. This paper first considered some reason why is difficult to predict exchange rate, because there are so many reason why is difficult to predict exchange rate, and also the approach used in forecasting exchange rate and finally the effectiveness of those methods used in forecasting exchange rate trying to know the most effective tools to use when forecasting exchange rate. Below diagram shows the previous exchange rate forecast between Euro currency and British pounds sterling between January 13 to December 14, it shows how exchange rate was appreciating and depreciating the diagram reveals that exchange rate as not been fixed and cannot be fixed to approach this exchange rate, this paper as discussed the method to forecast exchange rate and the most effective method to use in forecasting exchange rate.