The Time Series Forecasting for CNY-USD Exchange Rate

Abstract

China and the United States has worsened their foreign relationship after the trade war begin in 2018. Then the following policies and treaties also strongly affect the commercial activities of both sides. These also affect the exchange rate between Chinese YUAN and US dollar. First, this research is going to explain why two important time series forecasting models, neural network model and long short-term memory model, are used to predict the future exchange rate. Then the research would divide the exchange rate data into training set and testing set, then train the models with training set and forecast the exchange rate between Chinese Yuan and US dollar by using the R studio in programming. Finally compare the mean square error and mean absolute percentage error of the model’s forecasting value and the testing set value to show which model would have the higher accuracy in predicting the currency exchange rate.