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Confused about fundamentals

  • #1
  • First Post: May 6, 2007 3:18pm May 6, 2007 3:18pm
Hi,
I have just finished the book "10 essentials of trading" and he says that if interest rates increase the currency would weaken.
I was under the impression that increased interest rates strengtens the currency , because of people exchanging their currency for one with higher interest rate(Bonds etc..)

Could someone clarify this to me?
There are no certainties only oppurtunities.
  • #2
  • May 6, 2007 9:00pm May 6, 2007 9:00pm
Quoting USDSEK
Hi,
I have just finished the book "10 essentials of trading" and he says that if interest rates increase the currency would weaken.
I was under the impression that increased interest rates strengtens the currency , because of people exchanging their currency for one with higher interest rate(Bonds etc..)

Could someone clarify this to me?
Currencies are traded in pairs. If EU interest rate increase, USD will weaken, so EUR/USD will go up.
  • #3
  • May 6, 2007 9:28pm May 6, 2007 9:28pm
I was under the same impression after reading the book myself. The only conclusion i can provide is the facts. An increase in interest rates will strenghten the trading of that particular's currency (for the reason you provided....investment). I am not sure what Mr. Martinez was trying to get at, maybe it was in the long run, i am not sure, but what i am sure of (99% nothing is 100%) that if/when GBP increases interest rates on thursday the USDGBP chart will move upwards.
  • #4
  • May 6, 2007 9:44pm May 6, 2007 9:44pm
if the interest rate increase, people tend to save more to get the interest, so the bank pay more money for the interest,,, this "saved" money need to be spend , or else the bank will pay the interest for nothing ( loss )...

while the increasing number seem looks like a increasing value of a currency,it posses danger if the utilisation is low.
  • #5
  • Oct 5, 2014 11:02am Oct 5, 2014 11:02am
whynot use TECHNICAL analysis which is a nice summary of the fundamental news presented nicely on your chart
  • #6
  • Mar 13, 2015 2:31pm Mar 13, 2015 2:31pm
Please suggest me a good book on how interest rates/monetary policy/inflation/trade-balance affect a currency?
  • #7
  • Mar 13, 2015 2:33pm Mar 13, 2015 2:33pm
Quoting ericnyamu
whynot use TECHNICAL analysis which is a nice summary of the fundamental news presented nicely on your chart
That's a fact, yet fundamental gives reasoning for why its moving in such manner, which is good for a swing trader.
  • #8
  • Mar 28, 2015 3:06am Mar 28, 2015 3:06am
Quoting jayhasgin
Please suggest me a good book on how interest rates/monetary policy/inflation/trade-balance affect a currency?
Just search International Finance/Macroeconomics and a book by Paul Krugman will come up. Very informative and good.
  • #9
  • Mar 29, 2015 3:36am Mar 29, 2015 3:36am
I would second Paul Krugman as well..it really answers most questions newbies have, regarding economy, price, valuation, inflation and the rest..good luck.
  • #10
  • Last Post: Mar 30, 2015 11:02am Mar 30, 2015 11:02am
Here's my opinion about Fundamentals vs. Technicals

Fundamentals tell you what should happen

Technicals tell you what did happen

So, in my opinion Fundamentals are completely worthless in trading where technical analysis is completely worthless in investing. Anyone who uses fundamentals in any trade less than 3 months in duration doesn't understand what trading is. Trading is buying when price action is going higher and selling when price action goes lower. The fundamentals are worthless.
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