Study on Correlation between Different NDF Data and Fluctuations of RMB Exchange Rate

Forecasting of exchange rate is a nonlinear problem. In this paper, we use Nonlinear Auto Regressive model which is named NARX for short with exogenous Inputs to forecast RMB exchange rate. Due to the selecting of external input X can influence the accuracy of forecasting, we choose non-deliverable forward exchange rate, which is known as NDF, to be X and achieved good results. There are many kinds of NDFs in different time spans, this paper contrasts the differences of network performance when using different NDFs as X, and get the result that the correlation of using different NDFs is not that big. We can always get very good result when using any time spans’ NDF. And NDF is effective when using it to exchange rate forecasting.