Forecasting Malaysian Ringgit Using Exponential Smoothing Techniques

Noreha Mohamed Yusof; Norani Amit; Nor Faradilah Mahad; Noorezatty Mohd Yusop

doi:10.24191/jcrinn.v6i2.183

Forecasting Malaysian Ringgit Using Exponential Smoothing Techniques

Authors

Noreha Mohamed Yusof Center of Statistical and Decision Science Studies, Faculty of Computer and Mathematical Sciences, Universiti Teknologi MARA Cawangan Negeri Sembilan
Norani Amit Center of Statistical and Decision Science Studies, Faculty of Computer and Mathematical Sciences, Universiti Teknologi MARA Cawangan Negeri Sembilan
Nor Faradilah Mahad Center of Mathematical Studies, Faculty of Computer and Mathematical Sciences, Universiti Teknologi MARA Cawangan Negeri Sembilan
Noorezatty Mohd Yusop Center of Statistical and Decision Science Studies, Faculty of Computer and Mathematical Sciences, Universiti Teknologi MARA Cawangan Negeri Sembilan

DOI:

https://doi.org/10.24191/jcrinn.v6i2.183

Keywords:

exponential smoothing, forecasting, univariate model

Abstract

Forecasting the foreign currency exchange is a challenging task since it is influenced by political, economic and psychological factors. This paper focuses on the forecasting Malaysian Ringgit (MYR) exchange rate against the United States Dollar (USD) using Exponential Smoothing Techniques which are Single Exponential Smoothing, Double Exponential Smoothing, and Holt’s method. The objectives of this paper are to identify the best Exponential Smoothing Technique that describes MYR for 5 years period and to forecast MYR 12 months ahead by using the best Exponential Smoothing Technique. The comparison between these techniques is also made and the best one will be selected to forecast the MYR exchange rate against USD. The result showed that Holt’s method has the smallest value of error measure which depending on the Mean Square Error (MSE) and Mean Absolute Percentage Error (MAPE) for the evaluation part. The MSE is 1.43915x10^-14 and MAPE is 2.5413 x 10^-⁶. Meanwhile, the forecast value of MYR in August 2019 is RM 4.30226.

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