How the Swine Flu is Affecting the Dollar, Peso, and Yen!
How the Swine Flu is Affecting the Dollar, Peso, and Yen!
Fist I heard about hog and pork belly futures taking a blood bath in the trading pits due to the swine flu. (Commodity traders were scared that while this is all going on that the public would eat less pork than they otherwise would.)
Then later on, the stock market cranked up and I saw Smithfield Foods (SFD) gap down and lose over 12% in a single day. Tyson Foods (TSN) gapped down too and traded down almost 9% on the day too.
It was then that I switched over to my currency screens and brought up the Mexican peso (USD/MXN). The peso was getting slaughtered over the swine flu.
It not only broke the downtrend line as the peso dove, but it gapped noticeably higher on the daily chart and soared over 5.25% on the day.
But why? What’s the big deal about this flu and why should it affect a currency?
Here’s how the peso gets punished for the “Swine Flu”!
Mexico has had 159 Swine flu related deaths and there are 2,500 that have been diagnosed, 1,300 of which are in the hospital.
Economists estimate that it has slowed Mexico’s economy by 60% recently (or an estimated $87 million A DAY)! All 35,000 restaurants in Mexico City have been ordered shut and the schools are already closed down.
The fear that is spreading from Mexico, now to other parts of the world is growing at a rapid pace. After all, this is not just a Mexico epidemic. The Swine flu has already spread to the U.S., Canada, Germany, Israel, Spain, the U.K., New Zealand and Australia.
Therefore, the media has taken this opportunity to feed this fear in hopes that it turns into a frenzy. After all, that makes for great ratings.
Swine flu is common. It’s common in pigs and this same type of flu is even common in birds too. We even had a bout of swine flu back in the 1970s here in the U.S. and there was a vaccine given out in 1976 that some people may still have in their body today.
However, the problem right now is that there is no vaccine currently and it takes at least 3-6 months to make a vaccine
If this fails to be contained, it will continue to hurt Mexico’s hotels, restaurants, bars, churches, tourism in general and anything having to do with the pork industry, etc. After all, who’s going to go to Mexico while they know all of this is going on?
Matter of fact, even once the “coast is clear” again one day, I’d bet that tourists will still avoid the place for a while longer just to be on the safe side.
After all, do you remember the SARS virus in Asia. Even though they got it contained in a relatively short amount of time, it virtually shut down Hong Kong for about 6 months.
Therefore, this is not just a health issue (which is most important) but it’s also a financial issue. And a financial issue is also a sentiment issue. After all, would you buy the peso knowing that all of this is brewing in their country? Of course not, and neither will millions of other traders around the world…hence the rise of the USD/MXN pair.
Therefore the deterioration economically that it has on any country can weigh down its currency as well. After all, currencies are basically valued based off of sentiment and that sentiment is based off of how well investors think the economy is doing.
The peso gets punished while the buck and the yen catch a break!
So money is flowing out of the peso at a rapid rate and is fleeing to the U.S. dollar and the yen as the market becomes “risk adverse” yet again over this epidemic that investors feel could become a pandemic.
Therefore expect more money to flow out of the peso until this problem gets reigned in and expect money to flow towards the greenback which will continue to crush the USD/MXN pair.
Should this flu virus start spreading to other countries rapidly, then you can expect the yen to be a huge beneficiary since the yen seems to thrive off of fear these days. The dollar will benefit as a close runner up for the very same reasons.
Therefore, keep an eye on how bad this “swine flu” gets in the media and in “real life” as this story continues to unfold. Because a whole lot more currencies could be “dragged into this mess” if it’s not contained rather quickly.
Until there is a vaccine and containment, this will be something that is a factor that could affect any currency. Since viruses “know no boundaries”, you will want to keep an eye out for where this thing is spreading so that you know what currencies will be the most effected.
I’ve learned a long time ago to position myself to profit from forces that are outside of my control. So my trading will continue to stay on the side that profits from the Swine flu but in my heart, I pray that this is contained soon so that I can profit from dynamics that don’t affect the world’s most valuable assets: humans!
Sean Hyman
How the Swine Flu is Affecting the Dollar Peso and Yen - To learn more about this author, visit Sean Hyman's Website.
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On Monday, as I watched the media breed fear into the public, I also saw my charts going nuts. The “Swine Flu fear” was spreading from people, to the financial markets.
Fist I heard about hog and pork belly futures taking a blood bath in the trading pits due to the swine flu. (Commodity traders were scared that while this is all going on that the public would eat less pork than they otherwise would.)
Then later on, the stock market cranked up and I saw Smithfield Foods (SFD) gap down and lose over 12% in a single day. Tyson Foods (TSN) gapped down too and traded down almost 9% on the day too.
It was then that I switched over to my currency screens and brought up the Mexican peso (USD/MXN). The peso was getting slaughtered over the swine flu.
It not only broke the downtrend line as the peso dove, but it gapped noticeably higher on the daily chart and soared over 5.25% on the day.
But why? What’s the big deal about this flu and why should it affect a currency?
Here’s how the peso gets punished for the “Swine Flu”!
Mexico has had 159 Swine flu related deaths and there are 2,500 that have been diagnosed, 1,300 of which are in the hospital.
Economists estimate that it has slowed Mexico’s economy by 60% recently (or an estimated $87 million A DAY)! All 35,000 restaurants in Mexico City have been ordered shut and the schools are already closed down.
The fear that is spreading from Mexico, now to other parts of the world is growing at a rapid pace. After all, this is not just a Mexico epidemic. The Swine flu has already spread to the U.S., Canada, Germany, Israel, Spain, the U.K., New Zealand and Australia.
Therefore, the media has taken this opportunity to feed this fear in hopes that it turns into a frenzy. After all, that makes for great ratings.
Swine flu is common. It’s common in pigs and this same type of flu is even common in birds too. We even had a bout of swine flu back in the 1970s here in the U.S. and there was a vaccine given out in 1976 that some people may still have in their body today.
However, the problem right now is that there is no vaccine currently and it takes at least 3-6 months to make a vaccine
If this fails to be contained, it will continue to hurt Mexico’s hotels, restaurants, bars, churches, tourism in general and anything having to do with the pork industry, etc. After all, who’s going to go to Mexico while they know all of this is going on?
Matter of fact, even once the “coast is clear” again one day, I’d bet that tourists will still avoid the place for a while longer just to be on the safe side.
After all, do you remember the SARS virus in Asia. Even though they got it contained in a relatively short amount of time, it virtually shut down Hong Kong for about 6 months.
Therefore, this is not just a health issue (which is most important) but it’s also a financial issue. And a financial issue is also a sentiment issue. After all, would you buy the peso knowing that all of this is brewing in their country? Of course not, and neither will millions of other traders around the world…hence the rise of the USD/MXN pair.
Therefore the deterioration economically that it has on any country can weigh down its currency as well. After all, currencies are basically valued based off of sentiment and that sentiment is based off of how well investors think the economy is doing.
The peso gets punished while the buck and the yen catch a break!
So money is flowing out of the peso at a rapid rate and is fleeing to the U.S. dollar and the yen as the market becomes “risk adverse” yet again over this epidemic that investors feel could become a pandemic.
Therefore expect more money to flow out of the peso until this problem gets reigned in and expect money to flow towards the greenback which will continue to crush the USD/MXN pair.
Should this flu virus start spreading to other countries rapidly, then you can expect the yen to be a huge beneficiary since the yen seems to thrive off of fear these days. The dollar will benefit as a close runner up for the very same reasons.
Therefore, keep an eye on how bad this “swine flu” gets in the media and in “real life” as this story continues to unfold. Because a whole lot more currencies could be “dragged into this mess” if it’s not contained rather quickly.
Until there is a vaccine and containment, this will be something that is a factor that could affect any currency. Since viruses “know no boundaries”, you will want to keep an eye out for where this thing is spreading so that you know what currencies will be the most effected.
I’ve learned a long time ago to position myself to profit from forces that are outside of my control. So my trading will continue to stay on the side that profits from the Swine flu but in my heart, I pray that this is contained soon so that I can profit from dynamics that don’t affect the world’s most valuable assets: humans!
Sean Hyman
How the Swine Flu is Affecting the Dollar Peso and Yen - To learn more about this author, visit Sean Hyman's Website.
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