Question

What are the various methods of forecasting exchange rate?

Answer 1

Different Methods of Forecasting Exchange Rates

Better Than Tea Leaves. Unlike reading tea leaves, forecasting exchange rates employs analytical principles to determine future rates. ...

Purchasing Power Parity. Purchasing power parity (PPP) is a commonly-used method based on the theory of the Law of One Price. ...

Relative Economic Strength Approach. ...

Econometric Models.

Answer 2

Purchasing power parity looks at the prices of goods in different countries and is one of the more widely used methods for forecasting exchange rates due to its indoctrination in textbooks. The relative economic strength approach compares levels of economic growth across countries to forecast exchange rates