Exchange rate stability plays an important role in economic and financial stability, and exchange rate movements have significant and large effects on the trade balance, allocation of resources, domestic prices, interest rate, inflation level, national income and other key economic variables. So how about forecasting exchange rate movements using these fundamental economic variables. Economists have long believed that economic fundamentals determine the exchange rate. However, in the early 1970s, after the collapse of the fixed exchange rate regimes of the Bretton Woods system, excessive volatility and disorderly nonlinear movements of the exchange rate have become mysteries that traditional exchange rate theory cannot explain (1.pdf). Wang Jing believes that "there is no definitive evidence that the economic variable can predict the exchange rate for currencies of nations with similar inflation rates", which has been called the "exchange rate disconnect puzzle" by Meese's studies and Rogoff. So why is it so difficult to predict exchange rate movements? At the beginning, we start from the two extreme forms of exchange rate regime, namely, fixed exchange rate and floating exchange rate. Without the intervention of the monetary authority, the exchange rate is determined at any time by market supply and demand. Whenever supply does not equal demand, the exchange rate changes. However, the reality becomes much more complicated by fundamental exchange rate models, for example, including the monetary model, the Mundell-Fleming model and the Dornbusch model. The monetary model links exchange rate movements to the balance of payers... at the center of the paper..., integrates expectations and combines with the short-run and long-run properties of the MF model and the monetary mode respectively. Overshooting theory is a significant contribution made by the Dornbusch model. Of course, any predictability found in such a model is of limited use to financial market analysts and policymakers facing the unenviable task of predicting exchange rates in real time. Furthermore, recent research implies that these models may lack forecasting ability and, instead, it is the exchange rate that achieves predictability on these fundamentals. Under ideal conditions, the ratio between the currencies of different countries reflects the differential in their purchasing power. In fact, the exchange rate can be both an indicator of the level of national credit, and the government's tool for regulating the economy, and the weapon of trade war.