Does that make any sense whatsoever? No - that's right it doesn't. We've been expecting no change yet the Yen drops like a rock. The way the Yen went suggests that the dollar strengthened on the news. Yet the dollar didn't change at all - it remained exactly the same. The amount of interest gained by the dollar didn't change - but still this amazing overshoot. By 4 A.M. tomorrow morning (if not sooner) the Yen should be back where it started.
Since there was no change expected a short sale around 1 P.M. EDT would have been appropriate. The only way the Yen would have gone more expensive to the dollar would have been if the Fed cut rates which would have cheapened the dollar. So 2 out of 3 for a Yen drop in value versus 1 out of 3 with absolutely no confidence in a Yen appreciating in value. It's a no brainer and almost an automatic profit. Just keep "almost" firmly in mind if you ever do this. And if you decide to trade FOREX I suggest you watch for awhile and learn how it reacts to various U.S. economic reports before you put your money in play.
4 comments:
Marlyn,
The value of the dollar did drop against the yen. The dollar became weaker. Just the continuation of the bleeding of the dollar.
Mike
Yeah that's the appearance - but the problem is nothing changed in that split second to cause this reaction. And the reaction was clearly one to a cut in interest rates which adds dollars to the economy - so - since there wasn't a cut and no dollars were added the reaction was either unnecessary or a discounting of a rate cut that will happen in June.
And that's my only point. We'll have to wait till June to see the end of the story.
And be careful - did the dollar drop against the Yen or did the Yen rise against the dollar? Inquiring minds could care less of course but only the shadow knows.
Crap! - The headline of the article should have been "Dollar Dives" - I'm having a bad week - thank god a couple of my trading stocks are doing well enough without me.
The yen is dead.
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