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Navigate the complex world of currency management with our comprehensive dictionary of financial terms and definitions.

exchange rate forecast

Exchange rate forecasts are quarterly estimations of the future levels of exchange rates over the next four quarters. They are undertaken by economists and currency analysts working for portfolio management firms and investment banks. Exchange rate forecasts are for the most part based on expectations regarding macroeconomic variables, interest rate differentials, sentiment, and even political events. Once these individual forecasts are out, their average —for each currency pair— is presented in a variety of surveys. Some companies incorporate such average forecast exchange rates as ‘budget rates’ for a period. However, given the unpredictable nature of currency moves, the reliability of exchange rate forecasts remains an open question.