Exchange Rate Determination: Models and Strategies for Exchange Rate Forecasting

Part of the Irwin Library of Investment and Finance, this book offers an examination of today's major exchange-rate forecasting models and tools - and when to use each for maximum efficacy and accuracy. Increased global trade and cross-border interaction have redefined the worldwide business arena. At the same time, the ability to accurately forecast and determine exchange rates has come to dictate the terms of success for companies conducting business in that arena. "Exchange-Rate Determination" explores today's most popular models and strategies for forecasting exchange rates, and reveals the strengths, weaknesses, and appropriate applications of each. Covering short-, medium-, and long-run time frames, this essential combination of reference and workbook discusses: potential risks and rewards of short-term forecasting approaches; methods for using technical analysis for currency forecasting; the importance of financial flows in the determination of exchange rates; and, models and techniques for forecasting foreign exchange rates are as numerous as they are contradictory. Yet, getting the right exchange rate is critical for any company doing business in today's global economy. Let "Exchange-Rate Determination" introduce you to today's most effective forecasting tools and, just as important, show you when to use those tools for maximum accuracy, impact, and profit. 'Having endeavored to forecast exchange rates for more than half a century, I have understandably developed significant humility about my ability in this area. ' - Alan Greenspan. 'Perhaps all that one can say after reviewing all the different approaches to exchange-rate determination is that no single approach has a monopoly on being right all of the time' - From the introduction. The fact that accurate exchange-rate forecasting is frustrating and difficult does not make it any less vital. "Exchange-Rate Determination" examines the wide array of methods and approaches that institutional investors, global banks and corporations, and others involved in international finance use to forecast foreign exchange rates. This first-of-its-kind book summarizes each in an easy-to-read, user-friendly format, and provides historical data on why and in which situations each has proven to be most accurate and profitable.Written by the leader of the number-one-ranked foreign exchange rate research team in the world, this exhaustively researched yet fluid and reader-friendly book covers tools and methodologies used to forecast exchange rates over different timeframes including: Short-Run - Tools examined include moving-average trend-following trading rules, sentiment and positioning surveys, FX dealer customer-flow data, and more; Medium-Run - Macroeconomic indicators examined include trend in real interest rate differentials, current and capital account balances, relative monetary and fiscal policies, and more; Long-run - Forces that give rise to long-term cycles are discussed, including relative productivity growth; trends in a country's terms of trade, savings, and investment; and more; and, the overriding rule of forecasting exchange rates is that, in the end, no overriding rules exist. Still, fund managers and financial professionals must, on a daily basis, make major decisions based on exchange-rate variables and variations. "Exchange-Rate Determination" gives practitioners the tools and techniques for understanding and acting upon the science and, just as frequently, the art of successful FX management. Combining theory and application in a workbook-like setting, it is exhaustive in its coverage of today's most market-tested models and strategies - and provides investors and money managers with a firm foundation for applying those strategies in the high pressure, high-stakes arena of exchange rate forecasting.