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Stock index price forecasting is a consistent focus of business intelligence. Various factors influence stock index price forecasting, such as technical indicators, financial news, business status, and the macroeconomics situation. In addition, many studies have shown that the exchange rate is related to the stock index price; however, no study has examined whether the exchange rate can be used to forecast stock index prices. Therefore, this paper focuses on this topic and uses exchange rate to predict China stock index price for the first time. Firstly, we compare the association of China stock index price with different data sources to illustrate the feasibility of using the exchange rate to predict stock index prices. Then, we generate some additional technical features of the exchange rate and propose a strategy to predict the stock index price. Finally, we compare the forecast results of China's stock index price based on four data sources, i.e., technical indicators, exchange rate data, US market index data and finance news data from January 3, 2017 to March 20, 2019. Experimental results demonstrate that the performance of exchange rate data for stock index prediction is comparable to other popular data sources and that, in some prediction periods, the exchange rate outperforms such data sources. The results confirm that the exchange rate could be used for forecasting the Shanghai Composite Index prices.
Zhang et al. (2019) studied this question.