Jul. 22, 2025 2:50 AM ETCFA Institute Contributors5.46K FollowersSummarySpikes in exchange rate volatility and interest rate spreads tend to show up before major stresses in currency markets.Traders and policymakers watch credit default swap spreads for sovereign debt, since widening spreads signal growing fears about a country’s ability to meet its obligations.In recent years, machine learning has taken FX forecasting a step further.WANAN YOSSINGKUMBy Sebastian Petric, CFAWhy do exchange rates often move in ways that even the best models can’t predict? For decades, researchers have found that "random-walk" forecasts can outperform models based on fundamentals (Meese & Rogoff, 1983a; Meese & Rogoff, 1983b). That’s puzzling. Theory says fundamental variables should matter. But in practice, FXThis article was written byCFA Institute Contributors5.46K FollowersCFA Institute is a global community of more than 100,000 investment professionals working to build an investment industry where investors’ interests come first, financial markets function at their best, and economies grow.CommentsRecommended For You