"Risk Appetite" bull | Forex Factory

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"Risk Appetite" bull

  • #1
  • First Post: Edited 6:10am Jul 16, 2009 6:09am | Edited 6:10am
Hi all,

Has anybody else been p**sed off seeing drops in US dollar described as "increases in risk appetite"? Surely I can't be the only one? Isn't the USD the most risk prone currency on fundementals? I'm new to this but really...an increase in RISK APPETITE? WTF???
  • #2
  • Jul 16, 2009 6:29am Jul 16, 2009 6:29am
Welcome to the FX wonderland, where logic is checked at the door and smoke 'n mirrors rule the day!
  • #3
  • Jul 16, 2009 6:39am Jul 16, 2009 6:39am
Quoting iseepips
Hi all,

Has anybody else been p**sed off seeing drops in US dollar described as "increases in risk appetite"? Surely I can't be the only one? Isn't the USD the most risk prone currency on fundementals? I'm new to this but really...an increase in RISK APPETITE? WTF???
Looks like you might be reading a lot of the so-called "analysts" garbage here in FF.

Toss them out and trade your method and take the signals ignoring the analysts.

They have reasons if $ goes up and reasons when it goes down.
  • #4
  • Jul 16, 2009 7:15am Jul 16, 2009 7:15am
Quoting denverdude
They have reasons if $ goes up and reasons when it goes down.
And if there are no reasons, they will "make up" some...
  • #5
  • Jul 16, 2009 9:29am Jul 16, 2009 9:29am
Quoting iseepips
Hi all,

Has anybody else been p**sed off seeing drops in US dollar described as "increases in risk appetite"? Surely I can't be the only one? Isn't the USD the most risk prone currency on fundementals? I'm new to this but really...an increase in RISK APPETITE? WTF???
The USD has an interest rate of 0.5% (nominally), and is backed by the full faith and credit of the US government. It is a 'safehaven' currency. An increase in risk appetite means funds are moving to investments with higher rates of return (stocks, for example). That is why higher yielding currencies such as the Aussie dollar do well when risk comes back to the market. Why would you buy USD or Yen and earn a near-zero % interest rate when you could park your money in AUD and earn 3%?

That is what is meant by an increase in risk appetite. You are new to this, clearly But there is some good advice here if you are a technical trader,

Quote
Looks like you might be reading a lot of the so-called "analysts" garbage here in FF.

Toss them out and trade your method and take the signals ignoring the analysts.

They have reasons if $ goes up and reasons when it goes down.

You will be out of your mind if you try to trade the analysts' opinions (in MY opinion).

Also, I suggest you read up on the market you want to trade more. There are a lot of resources available. The Federal Reserve actually has a lot of papers out about the foreign exchange market, its main participants, what drives it, etc., and I believe they're all available for free online in pdf format.
  • #6
  • Jul 16, 2009 12:57pm Jul 16, 2009 12:57pm
Quoting iseepips
Hi all,

Has anybody else been p**sed off seeing drops in US dollar described as "increases in risk appetite"? Surely I can't be the only one? Isn't the USD the most risk prone currency on fundementals? I'm new to this but really...an increase in RISK APPETITE? WTF???
Where were you last year ??
The only way to get smarter is by playing a smarter opponent.
  • #7
  • Jul 17, 2009 8:00pm Jul 17, 2009 8:00pm
Revisionist history at its best.
  • #8
  • Jan 27, 2011 7:08pm Jan 27, 2011 7:08pm
Quoting smittens4212
The USD has an interest rate of 0.5% (nominally), and is backed by the full faith and credit of the US government. It is a 'safehaven' currency. An increase in risk appetite means funds are moving to investments with higher rates of return (stocks, for example). That is why higher yielding currencies such as the Aussie dollar do well when risk comes back to the market. Why would you buy USD or Yen and earn a near-zero % interest rate when you could park your money in AUD and earn 3%?

That is what is meant by an increase in risk appetite. You...
Hi. I just read your post today. Thanks for sharing knowledge.
I have few questions.
1. What exactly happens to the dollar when people move funds to stocks markets? You meant they sell dollar and buy stocks? You meant they were holding dollar before buying stocks? I'm confused between people sell dollar to buy stocks and people(who are not holding dollar) buy dollar to buy stocks(is this small in amount so we do not count?).

2. If risk appetite is key, how do I identify from news I read that risk appetite increases or risk aversion comes up?
  • #9
  • Jan 27, 2011 7:51pm Jan 27, 2011 7:51pm
re: the post above. When you buy bread, you're actually selling dollars for bread. The baker is buying dollars from you and paying for them with bread.

Same with stocks. When someone pays $10 for a share of stock, they've sold dollars to buy stock. The person on the other side of the transaction has bought dollars and sold stock.

But anyway, in response to the OP, I'm an example of exactly what you're asking about. Interest rates in Turkey, Hungary and South Africa are higher than interest rates in the U.S. Among other reasons, they're higher because of greater perceived risks in those economies.

So because I want the greater yield (multiplied by a reasonable level of leverage) from those rates, I accept the greater risk. So I buy Lira, Forints and Rand, funded by shorting the dollar.

So the dollar is falling because I'm dumping it in order to chase higher risk/yield elsewhere.

Well ok, maybe it's not JUST me...
  • #10
  • Last Post: Jan 28, 2011 11:52am Jan 28, 2011 11:52am
Quoting capitalist88
re: the post above. When you buy bread, you're actually selling dollars for bread. The baker is buying dollars from you and paying for them with bread.

Same with stocks. When someone pays $10 for a share of stock, they've sold dollars to buy stock. The person on the other side of the transaction has bought dollars and sold stock.

But anyway, in response to the OP, I'm an example of exactly what you're asking about. Interest rates in Turkey, Hungary and South Africa are higher than interest rates in the U.S. Among other reasons, they're...
Thanks for your example. In your example, I understand as the funds is moved to another country, so the dollar is dumped.

I'm still in doubt in the case of USA. The funds is not moving to another country/currencies when people buy stocks. So how the dollar go down? It should remain the same level as before, isn't it? The only scenario I read from somewhere is when people buy stocks, they exchange it with dollar, which increases dollar supply in the market. I almost understand this scenario but not 100% clearly.

Can anybody explain this or point me to some websites which explain this?

*The second question(how to spot risk appetite) is still pending answers.

Thanks.
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