Graph Attention Networks in Exchange Rate Forecasting

Abstract

Exchange rate forecasting is an important issue in financial market analysis. Currency rates form a dynamic network of connections that can be efficiently modeled using graph neural networks (GNNs). The key mechanism of GNNs is the message passing between nodes, allowing for better modeling of currency interactions. Each node updates its representation by aggregating features from its neighbors and combining them with its own. In convolutional graph neural networks (GCNs), all neighboring nodes are treated equally, but in reality, some may have a greater influence than others. To account for this changing importance of neighbors, graph attention networks (GAT) have been introduced. The aim of the study was to evaluate the effectiveness of GAT in forecasting exchange rates. The analysis covered time series of major world currencies from 2020 to 2024. The forecasting results obtained using GAT were compared with those obtained from benchmark models such as ARIMA, GARCH, MLP, GCN, and LSTM-GCN. The study showed that GAT networks outperform numerous methods. The results may have practical applications, supporting investors and analysts in decision-making.