is it possible to predict change in currency value ?

Answer 1

Not in a way that will make you any money unless you have inside information. The second any information that could effect currency values become available ,traders all over the world act on it and adjust the value to take it into account.

Answer 2

Yes, the economist Keyens built an economic model which is a string of mathmatical formulas. Over the years this model has been improved upon over the years and adjusted to fit better different countries economies.

Since all money now is "fiat currency" or a currency's value is determined by the stregnth of a country's economy when compared to the strength of it's competitor's or other countries currency.

Since economic models have been fed into computers as complicated as it seems and it is complicated. Economists measure various changes in their own country's and other nation's economy's into the economic model and then can calculate various factors, one of them what will be the future value of a country's currency.

Of course random events occur which are not economic factors but political ones or even large scale natural disasters. These distortions have been added into economic models and to guage their effects economists watch certain economic indicators the same way a weather forecaster measures air pressure to help predict the weather.

One rule of thumb that is fairly good but should not be used on a consistant basis is the interest rates. If interest rates rise the currency will rise and if interest rates fall then the currency follows in tandem. If a country X's raises interest rates, then investors from nation Y sell their own nation's currency and it's value drops. They they buy country X's currency to invest and garner the higher interest rate. Country X then has more capital it can invest and buy things that increase it's production.

But it isn't that simple, people who want to borrow, borrow from country Y because it has lower interst rates and consequently buy it's goods and services. So eventually over the longer term, the Adam Smith's invisible hand steps in and creates events where by country X and country Y currencies end up relatively equal. Buy equal I mean equal in buying power.

The Federal Reserve Banks of the United States publish five year forecasts. Each forecast is in units of five years and every year it tweaks each five year forecast. For example it has a forecast for 2010, 2015, 2020 2025, 2030, 2035, always six forecasts to echo the sale of U.S. 30 years bonds and debt issues.

These forecasts are public and if you can wade through them you can find the currency forecasts for many counties, all of them U.S. trading partners. The St. Louis fed has the best record in the world of forecasting economic events including the ultimate value of various currencies and it describes the various distortions that affect that currency.

So if you want to make a few bucks, you can buy no load funds from your broker that buy the debt instruments of countries whose curriencies are valued too low because of distortions and who also the Fed predicts it's curriencies will rise. If you reinvest the dividends and interest, you get a double dip because of the compouding effect and the ultimate rise in that nation's currency. You should never buy futures or currency options however, they are too risky.

Right now current Fed forecast think the U.S. dollar is undervalued because of distortions related to the war in Afghanistan and the war in Iraq (the current petroleum bubble affects all economies in the same way, driving down their currencies in proportion of size and activity.)