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
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.
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.
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.
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?
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
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.
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.
nice to know im not the only one thinkin it 
To add something more to the table…last friday, the dollar reached an all time seven-week high against the yen. But, for all you yen traders out there, a warning, I wouldn’t bet on the yen too heavily…Japan’s economic recovery is on track.
I am struggling to understand all of this - Is it in Japans interests to keep the dollar high ?
couldn’t elaborate on your last post a bit for me could you ?
peter
( now reading “economics for dummies” )
The strenght is relative.
At this point it is Jpan’s interest to have a weak yen to encorage the local industries to export more goods for expensive dollars.
Since they export more than they import it is a net benefit to their economy.
even the indian rupee is going on strong. it has been the best performing currency in asia for the whole year till now.
besides making the subprime problem worse, the other reason the fed won’t raise rates in the short term is because the US economy is being entirely propped up by consumer spending which depends on cheap credit. a real catch 22.
The dollar is likely to fall a little bit againts the euro this week as meetings of the Federal Reserve and the European Central Bank bring interest rates back into focus. Just a pointer.
I think the dollar is set to move up. There is plenty of data this week that could allow the dollar to extend its modest gains versus the euro, while it also reaches a four-year high againts the yen. If you remember last week, the yen fell after the Bank of Japan left interest rates on hold at a superlow .5%. Personally I think the euro has topped out for now. The US economic reports this week are limited to the second-tier dataon durable goods orders and a pair of housing indicators, which I don’t think will shift the market. The dollar has recovered 1.4% againts the euro. The dollar’s gains come as investors start changing their views that favored a rise in euro-zone interest rates throughout the year.
Its my opinion that the market just does not seem that optimistic about Europe’s growht outlooks.
I think much of Euro’s price action was due to order flows - kinda hard to pin down what caused the dollars ebbs and flows againts the euro yesterday. There must have been a large institution buying dollars for yen, so this and other position-jockeying could have been responsible for the euro-dollar’s moves.
The dollar’s renewed upswing looks likely to persist this week as investors seem to have discarded the possibility of a cut in U.S. interest rates in the near future.
The central issue for currency traders this week is whether the market has overshot, and whether data this week – including reports on retail sales and consumer prices – will undermine or confirm the more upbeat view of the economy.
Newbie here but I’ve always been prejudiced to fundamentals.
I’m thinking dollar will continue to weaken for the following reasons:
As I said I’m a newbie, but every time I’ve been stopped out so far, I wish I had just held firm to my fundamental convictions and not even set a stop.
What do you think?