Finance
Forecasting major currency exchange rates using long short-term memory networks: Evidence from multi-currency time series analysis
Name and surname of author:
Shahryar Ghorbani, Figen Yildirim, Ali Altug Bicer, Reza Rostamzadeh, Jonas Saparauskas
Keywords:
Exchange rate forecasting, deep learning, LSTM, currency time series, forecasting performance, financial modeling, visual diagnostics
DOI (& full text):
Anotation:
Exchange-rate dynamics are non-linear and volatile, which challenges conventional forecasting approaches. This study evaluates a reproducible long short-term memory (LSTM) framework for daily EUR/USD, GBP/USD, USD/TRY, and USD/JPY over 1 January 2010 to 31 December 2021. The contribution is twofold: (i) a fully specified and deployment-oriented LSTM protocol (architecture, preprocessing, and leakage-safe validation) suitable for applied forecasting; and (ii) a time-series-appropriate evaluation that combines rolling-origin (walk-forward) testing with standard baselines (random walk and ARIMA) and diagnostic visualizations. Forecast performance is reported using root mean square error (RMSE), mean absolute error (MAE), Pearson correlation (R), Nash-Sutcliffe efficiency (NSE), and the RMSE-to-SD ratio (RSR), alongside distributional diagnostics (violin plots) and horizon-specific error profiles. The results quantify performance gains relative to baselines under leakage-safe evaluation, while highlighting practical implications for treasury and risk management. Limitations include the exclusion of exogenous drivers and longer-horizon tests, motivating extensions that incorporate macro-financial signals and interpretability modules.
Exchange-rate dynamics are non-linear and volatile, which challenges conventional forecasting approaches. This study evaluates a reproducible long short-term memory (LSTM) framework for daily EUR/USD, GBP/USD, USD/TRY, and USD/JPY over 1 January 2010 to 31 December 2021. The contribution is twofold: (i) a fully specified and deployment-oriented LSTM protocol (architecture, preprocessing, and leakage-safe validation) suitable for applied forecasting; and (ii) a time-series-appropriate evaluation that combines rolling-origin (walk-forward) testing with standard baselines (random walk and ARIMA) and diagnostic visualizations. Forecast performance is reported using root mean square error (RMSE), mean absolute error (MAE), Pearson correlation (R), Nash-Sutcliffe efficiency (NSE), and the RMSE-to-SD ratio (RSR), alongside distributional diagnostics (violin plots) and horizon-specific error profiles. The results quantify performance gains relative to baselines under leakage-safe evaluation, while highlighting practical implications for treasury and risk management. Limitations include the exclusion of exogenous drivers and longer-horizon tests, motivating extensions that incorporate macro-financial signals and interpretability modules.
APA Style Citation:
Ghorbani, S., Yildirim, F., Bicer, A. A., Rostamzadeh, R., & Saparauskas, J. (2026). Forecasting major currency exchange rates using long short-term memory networks: Evidence from multi-currency time series analysis. E&M Economics and Management, 29(2), 220–239. https://doi.org/10.15240/tul/001/2026-2-014