Capital markets can have an impact on currency markets in various ways. For example, if a strong stock market rally that occurred in the U.S., with the Dow and Nasdaq to register impressive gains, we tend to see a large influx of foreign money into the U.S., because international investors rush in to join the party. This flow of money will be very positive for the U.S. dollar, due to participate in the stock market rally, foreign investors must sell their own domestic currency and buying U.S. dollars. The contrary is also true: if the stock market in the U.S. is playing bad, foreign investors will likely rush to sell U.S. equity ownership and then change back to the U.S. dollar to their local currency - which would have a substantial negative impact on the greenback. This logic can be applied to all other currencies and capital markets around the world. This is also the most basic usage of capital market flows to trade FX
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