Purpose: The study aims to find out the suitable model for exchange rate determination and economic variables which affect movement of exchange rates by reviewing available studies. Design/ methodology/ approach: The study is descriptive and is entirely based on secondary data. Findings: There is no one perfect model which can determine exchange rate movements. Inflation, interest rates, money supply, current account balance, oil prices are among the macroeconomic variables and currency order flow is microeconomic variable which affect exchange rates. KEY WORDS: Exchange rate, monetary model, portfolio balance model, IRPT model,PPP model, macroeconomic factors, macroeconomic & microstructure factors.