A large literature suggests that standard exchange rate models cannot outperform a random walk forecast and that the forward rate is not an optimal predictor of the spot rate. However, there is eviden
Two well-known, but seemingly contradictory, features of exchange rates are that they are close to a random walk while at the same time exchange rate changes are predictable by interest rate different
The level of the (log of) the exchange rate seems to have strong forecasting power for dollar exchange rates against major currencies post-2000 at medium- to long-run horizons of 12-, 36- and 60-month