Exploring the influence of soft information from economic news on exchange rate and gold price movements

Abstract

Information on business conditions is an important concern for market players and regulators. Hard information relates to easily validated characteristics such as production levels and employment conditions. In contrast, soft information such as consumer and public perceptions—is subjective and difficult to verify. Although previous studies on hard and soft information mainly focus on microeconomics and banking, current developments in big data and machine learning enable broader applications in financial market analysis. This study combined VADER sentiment analysis and support vector machine (SVM) classification (accuracy=85%) to analyze economic news, followed by Granger causality and multiple linear regression to examine causal effects and predictive relationships. The findings reveal that negative news sentiment and the Indonesian Rupiah (IDR) exchange rate influence each other, while positive sentiment has no causal impact on the exchange rate. Both negative and positive sentiments affect gold prices, whereas gold price movements do not influence sentiment. Regression analysis shows that negative sentiment has a stronger effect in decreasing the IDR exchange rate than positive sentiment, with the model explaining approximately 20% of the variance. Integrating sentiment and exchange rate data enhances the predictive model for gold price forecasting and highlights the asymmetric roles of positive and negative news in financial dynamics.