Exchange Rate Forecasting via a Machine Learning Approach

Abstract

This paper attempts to forecast exchange rates by applying a machine learning approach. More specifically, in this study, we attempt to forecast the dynamic evolutions of the four exchange rates of Canadian dollars, Australian dollars, Great Britain pounds, and euros, which are all against the US dollar, by using random forest methodology. Evaluating the effectiveness, we find that the predictive performance of random forest approach in exchange rate forecasting is rather high.