Questions about inflation

Hi to you all,

Hope you can clear something to me that I don't quite understand now.

The question is:

Why when the CPI or PPI for that matter comes out higher than expected (i.e. 0.8% vs. 0.5% expected) the respective currency appreciates?

Isn't it supposed to depreciate? I mean isn't inflation "bad"? Or so I learned in school. Now I know that deflation is worse - see Japan that has been strugling for years with it, and a 2-3% inflation is beneficial as it is an "acceptable level" for the economy, but I don't understand the correlation between an increased level of inflation yoy and a currency appreciating vs. the others.

And also, I know there is an indirect correlation between inflation and interest rates - inflation rises so a rate cut is the measure and vice-versa.
Is it correct or am I missing something?

Thanks for your help and many pips I wish to you,

All the best,

Bogdan.

Reason behind this is that investors are always looking @ interest rates...that is...how much can my money grow per year if converted to your currency?

one way inflation is fought is by raising interest rates of the currency. This in return will influence people to buy your currency in place of another.

This is how the carry trade came about.
based on interest rate differentials.
JPY=0.5%
USD = 5.25%
If i use my US to buy YEN, then leverage that yen (say 10:1) and buy USD again, i am expected to get (5.25 - 0.5%)=4.75% times (10:1) = 47.5% ROI per year.

I need someone else to check my calculation plz, but that is the whole idea behind carry trades.