Monday, 29 Nov 2010 09:19 AM
By Sean Hyman
Many people hear the news. Meanwhile, I think of ways to
monetize that and to profit off of the news.
After all, you and I may not be able to change the events that
are happening, but we can learn to think in terms of the ways to
profit from what is going on in the world.
Every action has a reaction. This applies to the currency market
too.
For instance, let’s take the North Korea and South Korea scuffle
that we’ve seen recently. Tensions are building because North
Korea bombed a South Korean island and then South Korea returned
fire.
On top of this, the U.S. sent a warship, the USS George
Washington there to support them. That ship has about 6,000 men
and women on board as well as more than 70 aircraft. It’s
accompanied by two submarines and other destroyer ships that
carry artillery for it. So this is no small thing.
It gets to be an even bigger deal when you consider that China
is pledged to protect North Korea in a war and the U.S. is
pledged to protect South Korea in a war.
Therefore, a North Korea vs. South Korea war could blow up into
a China vs. the U.S. war. Therein lies the biggest worry and
that’s the thought that rattled the markets over the past couple
of trading days.
Here’s one thing that I’ve learned about watching currency
movements when bullets start flying. Since the U.S. tends to go
overseas to head to war, money tends to run away from the region
that becomes the potential battlefield and it runs back toward
the U.S.
So what is in this region? Well, it could affect the South
Korean won or other currencies there. But the major freely
traded currency in that region is Japan and its yen.
In fact, where the U.S and South Korea will be doing training
exercises this next week is somewhat close to Japan. They will
be training in the Yellow Sea.
Therefore, money is more likely to flow away from Japan during
that time and into the U.S. greenback, the world’s reserve
currency.
This will likely continue to be supportive of the buyers of the
USD/JPY pair as long as these tensions continue in that region
of the globe.
Learn to think in these terms when you see news. Think of who
could benefit and who could suffer as a result of the actions
that are being reported. In doing so, you’ll be training your
mind to profit from the stupid decisions that people make in the
world.
About the Author:
Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust.
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