Weak Dollar?

[ahefner33]

Hi all.

Why is the dollar being traded weaker than most all the majors? I thought the strong economic reports would boost the dollar and it did but as you can see its losing ground and a two year low against the EURO. Japan decided to leave rates unchanged but the yen is still gaining on the dollar. What are people factoring in? Thanks.

Adam

[forexcranium]

you can read my little post on the inflation - and what makes the dollar weaker. The old saying "when the american economy sneezes, the rest of the world gets sick," doesn't really apply to economics as much as it used to. Markets are independently becoming stronger - without the influence of america. Just another paradigm shift.

[forexcranium]

Mmmm...just out yesterday, the dollar edged higher against the euro - part of that came from the strong job report last week. Against the yen it continued to match its six-week high of 119.39 I think was the number.

[forexcranium]

I think most traders today focused mostly on the release of the minutes from the Federal Reserve's last policy meeting on march 20-21, which again, showed the Fed remains worried about inflation and that more rate increase may prove to be necessary. That is why, right after that report, we saw the dollar jump immediatly higher against the euro....only to drop again.

[ahefner33]

Originally Posted by forexcranium

I think most traders today focused mostly on the release of the minutes from the Federal Reserve's last policy meeting on march 20-21, which again, showed the Fed remains worried about inflation and that more rate increase may prove to be necessary. That is why, right after that report, we saw the dollar jump immediatly higher against the euro....only to drop again.

Forexcranium,

Hey. THis is where I get confused. Why with the report indicating that inflation has risen thus a possible rate increase does the market jump for a brief period then drop back to its pre report conditions? Wouldn't you want to hold that position and just sell if further indications show that there will not be a rate increase? Thanks.

[bogusrogus]

This is always the hardest part about trading. You really have to think where the market is positioned ahead of such news and then act accordingly. Think about who might be left to buy or sell on pre positions. It is only the truely suprising moves that seem to have legs. This inflation news was pretty ho hum and largely discounted.

As an example, last GDP report out of Aussie was expected to be .5% - it came in at a real suprise of 1.0% - Aussie gapped as shorts covered then collected for a bit as there were no more short term traders left to buy, then moved higher as the brits woke up to the news and took positions. That kind of suprise can lead to a better long term move than something that is a little more expected. Does that make any sense?

[pipoholic]

isnt the problem that if inflation accelerates and the fed raises interests, it will worsen the whole sub-prime morgage situation, and chanses of the crisis, or whatever you want to call it, spreads to the not-as-sub-prime-morgage-takers!?

//pipo

[ahefner33]

Originally Posted by bogusrogus

This is always the hardest part about trading. You really have to think where the market is positioned ahead of such news and then act accordingly. Think about who might be left to buy or sell on pre positions. It is only the truely suprising moves that seem to have legs. This inflation news was pretty ho hum and largely discounted.

As an example, last GDP report out of Aussie was expected to be .5% - it came in at a real suprise of 1.0% - Aussie gapped as shorts covered then collected for a bit as there were no more short term traders left to buy, then moved higher as the brits woke up to the news and took positions. That kind of suprise can lead to a better long term move than something that is a little more expected. Does that make any sense?

Hey. So your saying that if its already predictable, we have probably already seen in factored in so thats why there is not much change because they already knew about it or expected that? Also, whoever is left to receive the information (shock) will move the market and kind of cause a domino effect? But as I said in my initial post, I still do not understand why stronger inidications toward the dollar would push it weaker against other currencies? Sorry if I am not making since as to what I'm asking, I'm trying to word it as best as I can think of it.

[ahefner33]

Originally Posted by pipoholic

isnt the problem that if inflation accelerates and the fed raises interests, it will worsen the whole sub-prime morgage situation, and chanses of the crisis, or whatever you want to call it, spreads to the not-as-sub-prime-morgage-takers!?

//pipo

I was thinking of this too. I really don't know what the Fed's can do to help the situation because like you said, higher inflation will draw higher rates, thus causing a higher sub prime problem and also can damper people with good credit cause now this will cut into there earnings with higher cost.

[pipoholic]

nice to know im not the only one thinkin it :P