This paper proposes a network model of multilaterally equilibrium exchange rates. The
model introduces a topological component into the exchange rate analysis, consistently
taking into account simultaneous higher-order interactions among all currencies. The paper
defines the currency demand indicator. On its base, it derives a multilateral exchange rate
network, finds its dynamically stationary position, and identifies the multilaterally
equilibrium levels of bilateral exchanges rates. Potentially, the model can be developed
further to calculate the deviations of the observed bilateral exchange rates from their
multilaterally equilibrium levels, which can be interpreted as their over- or undervaluation.
For illustration, the model is applied to daily 1995-2016 exchange rates among 130
currencies sourced from the Thomson Reuters Datastream.