Predicting exchange rate between the us dollar (USD) and Indian rupee (INR): An empirical analysis using Sarima model

Abstract

Prediction of exchange rates is an important task of traders and practitioners in the recent financial markets era. Many statistical and econometric models are used in the time series analysis and prediction of foreign exchange rates. This study investigates the behavior of weekly exchange rates of the Indian rupee (INR) against the US dollar (USD) using time series analysis. This study used the SARIMA model in forecasting the INR/USD by aggregating seasonal data patterns in the foreign exchange market. Weekly RBI reference exchange rates from June 2013 to June 2023 were considered for the analysis. Finally, a forecast for ninety days was calculated which showed a depreciation of the Indian rupee against the US Dollar. The study found that the SARIMA model can be a better forecasting ability in advance of the prediction of currency exchange rates and momentum in the currency market.