Bad reports (news) results in the currency dropping

Hi everyone

I’ve been trading with a demo account for a little over a week now and I have had mixed success. In fact in my first week I am even with my balance. I was up at the beginning but had a couple of bad trades that wiped my profit - or most of it anyway.

Anyway my question to the forum is that I was looking at the USD/JPY. During this period some report on Japanese trade came out and it wasn’t the best news for Japan according to forecasts. With this I saw the USD/JPY rise for a short period, which I kind of expected. [I](Bad news meaning the USD would rise against the Yen?) [/I] After a short period though the price came all the way back down and even lower than before the report came out and after a number of hours it is still below the price before the report. My question is, why would, what appears to be bad news or a bad report for the Japanese economy (trade report) result in the USD/JPN coming all the way down, therefore showing the JPY stronger than the USD? I would have though this news would have made the USD stronger?

As a newbie am I missing something really obvious here? :15:

Bad news usually results in a move out of equity markets, and into cash

If that bad news happens in Japan, cash happens to be yen. Yen gets bought up, it rises against the dollar.

No, you got that backwards. Bad economic conditions will cause the Yen to FALL against the dollar.

Worsening economic conditions will usually provoke central banks to lower interests as a monetary stimulus. It’s that lowering of interest rates that devalues the currency since a lowering of interest rates is inflationary. Also, worsening economic conditions usually cause governments to overspend and go into deficit, which is also inflationary, which devalues the currency.

That’s why the US dollar has been pummeled in the last 20 years. The US government is overspending, creating huge deficits and promoting record low interest rates.

By the way, getting money from equity into cash doesn’t cause cash to be “bought”. If I sell my stocks, I don’t “buy” US dollars.

Bad news will not case the Yen to suddenly fall if the bad news was expected. If we knew bad news was coming for weeks, the Yen would depreciate over that duration in expectation of that bad news. The news was already priced in when the trade announcement was made.

It’s only when the news is unexpected would there be a longer term jarring effect on the USD/JPY.

Notice that before the economic news comes out, you have websites that quote what the expectations would be. These expectations are more important that the economic data itself.

LOL Noob…

Explain what happened after the earthquake in Japan.

If you don’t know what you’re talking about, don’t talk.

People like you gives me hope when trading Forex. Because people like you don’t know what they’re doing, which benefits me. I’d be shocked if you even know what “monetary policy” means.

From: How Global Events Affect The Forex Market

[I]Natural Disasters
The fallout from a natural disaster can be catastrophic for a country…The loss of life, damage to major factories and distribution centers, in addition to the uncertainty that inevitably come with natural disasters, [B]are all bad news for a currency[/B].[/I]

No… you DON’T buy dollars. But when you pull money out the equity market, what do you think it turns into? Lettuce? The fact that you sold your stock turns it into cash. You don’t HAVE to “buy”. It would be like you selling a car you owned. Did you “buy” cash? No, the buyer of your car gave you monetary worth for your goods. The act of many people leaving the equity market shortens the cash supply. A shortened cash supply moves up the value of a currency. If that happens to be in Japan, the yen rises, even if it’s only a short term lift. If the news is bad enough, that same money will then leave Japan in search of a more stable currency or market.

Again, if you don’t know what you’re talking about, don’t talk.

I’ll take the other side of your trade any time noob.

The manner in which you write doesn’t even sound like you’ve graduated from high school.

All I will say is, the best thing about capitalism is the mass transfer of wealth from ignorant people (like you) to intelligent people. Darwinism at its finest.

Hmmmm… Proper punctuation, articulate, correct spelling, good examples.

What part of reading comprehension do you have issues with?

It wasn’t but a week or so ago, you were asking the difference between a live account and a demo. Now you’re an expert on all things fundamental. Explain to me how you learned so much so fast.

I’d like to know the secret of your success.

And also, tell me when you finally commit some real dough into a live account. It’s hard to play for keeps when your account is loaded with toy dollars.

^ Nice of you to change the topic. I guess you’re not defending your earlier post because you know I’m right.

Getting back on topic, if you want to continue to claim that economic distress causes a country’s currency to strengthen, then that shows your ignorance in all its glory. I am not in the business of arguing with idiots so thanks for your nonreplies.

I don’t NEED to defend my posts. I’m right. Go back and read the OP’s issue. Bad news happened, the yen went up, causing the U/J to drop. Now, if your scenario was correct the OP should have made money. Apparently that didn’t happen, hence the post asking why bad news didn’t make the yen fall. How does that stack up to your theory?

More examples you ask?

Take for instance the fall/2008 housing crash, when Lehman went bust over the weekend. Bad news for the US right? What happened to the dollar? Go take a look at the charts and see. Did the dollar crash and burn on the bad news? Or did it go through the roof?

The aforementioned earthquake in Japan? Take a peek. Did the yen drop, or climb? March 2011 to see that.

I can give you loads of real time examples that absolutely stomp your limited knowledge of what happens in real life when bad news hits.

Sometimes bad news DOES make a currency drop. And sometimes GOOD news makes a currency drop. The “risk on” attitude moves the market out of the safety of cash, and into diversification.

You’re new at this game. You have a lot to learn. Don’t do it at the expense of someone else by giving bad advice. Learning to make a buck in the market is hard enough. It doesn’t need to be complicated.

I assure you, you’re complicating it.

Thanks for the replies - although I must say I’m now a little confused. Two different opinions so now I have a 50/50 as to what is the correct opinion :slight_smile:

In general is a bad report/news good or bad for the economy and therefore does it cause their currency to rise or fall I guess is the simple thing to ask?

I have seen in some, if not a lot of the cases, in just a week that the currency does not always follow the stocks/indexes though, but again is that common?

Don’t be fooled with that BS, traditional economic theories are total BS. If you wanna trade news it is up to you. But I will tell you a little secret, remember how you felt before, during and after that report and now think of it as an effect of a bunch of idiots feeling the same, put yourself inside their minds and try to gain some advantage among those suckers. There you go, that is how real traders work.