I would like to do some data analysis and find out how news and tweets influence markets. I would like to begin by investigating how USD does change according to news and various events. But is there any general currency value?

When I am looking for USD rate I get USD/EURO or USD/CHF.

Is it possible to get pure Dollar value to find out only how USD does change not influenced by other markets? Should I use USD/XAU?

Can I use CHF as a base? (it is very stable and doesn't change almost at all) Or something else? (Gold or whatever else?)

EDIT Or maybe US Dollar Index? (DXY)

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    What value does a dollar have outside of it's relationship with other items of value? This doesn't make sense. – Hart CO Mar 2 '18 at 18:30
  • so can I get a dolar value vs all other currencies? I want to analyse just a dolar without other currencies affect – Mateusz Mar 2 '18 at 18:31
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    For your analysis to make sense, I think you should probably get a better understanding on Currencies, GDP and other Macro and Microeconomic theories; considering the question you just posted. No offense :-) – ssn Mar 2 '18 at 19:36
  • Actually I am a comp scientist and want to use machine learning to analyse if politicians tweet influence markets. Ie. Trump tweets about Mexico and $ goes down, tweets that Putin is his friend and $ goes down again. – Mateusz Mar 2 '18 at 19:43
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    @Mateusz A big problem with your objective is that it is extremely difficult to say why eg the US dollar weakens or strengthens towards another currency. Let’s say that some politician says something radical that should make the dollar weaken against the euro, but at the same time someone in EU does something similar which triggers the opposite, actually cancelling each other out. Then rates will not change, and you machine will not catch it. Then multiply this scenario with the endless things that can affect FX rates. You need a really big computer that is extremely well programmed. – ssn Mar 2 '18 at 21:56

Use a USD index created against a weighted basket of currencies, e.g https://fred.stlouisfed.org/series/DTWEXM

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Imagine a group of boats bobbing up and down on the waves. You want to work out if your boat is going up or down. But all you have to compare it against are the other boats, that are also bobbing up and down. There's no fixed reference you can compare anything against.

You can compare the USD against the EUR or CHF, but that assumes the other currencies are fixed, which they aren't.

You can compare the USD against gold, but gold goes up and down in value*. the same goes for oil or other commodities.

You could compare the USD against a loaf of bread, but that won't help if there's a wheat shortage.

Probably the least worst option is to compare the USD against a whole basket of other things (currencies, commodities, or anything else you can get accurate prices for on a daily basis). But even that could be scuppered by a global recession that upsets everything.

(* whatever the gold bugs say)

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  • Great answer.So you think that US Index would be ok to check if Dollar changes up or down after politicians tweeets? – Mateusz Mar 3 '18 at 17:19

"Value" is defined by how much of something else something is "equivalent" to. So the value of a dollar is meaningless except in comparison to something else. If you don't want to compare it to other currencies, an option would be the Consumer Price Index. This metric takes a "basket of goods", and looks at how much the price of that basket changes. The larger the CPI, the weaker the dollar.

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  • but I guess that CPI is not calculated everyday? What would be the best way to get everyday currency inflation then? – Mateusz Mar 2 '18 at 19:34
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    @Mateusz it is very difficult to measure inflation on a day to day basis because prices don’t change that rapidly unless in a state of hyperinflation. Bread, milk and butter will most likely cost the same tomorrow as today and yesterday - but in 1-2 years from now it might not. Do you see my point? – ssn Mar 2 '18 at 22:01

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