If a Cow gets sick in New Zealand?

New Picture

So you think you want to trade currencies. You better be up to date on the butterfly effect, or in this case – the Cow effect. While we doubt milk production is part of many traders’ currency market evaluations, it looks like it has become a factor for one currency – the New Zealand Dollar.

You see, earlier this week, China banned milk from New Zealand because of bacterium that could cause botulism. Kind of makes you remember in a Steven Wright sort of way that we’re the only mammal which drinks the milk of another mammal.

The news was enough to send the New Zealand Dollar down around 1%, leading headline grabbing Business Insider to declare “Dairy Scare Is Causing Chaos For The New Zealand Dollar”Read more: with the following comments.

“China accounts for 25% of demand for New Zealand’s milk. In fact, China’s milk powder imports from New Zealand climbed 34.3% year-over-year in the first half of 2013. This accounted for 83.3% of China’s total milk powder imports. This shows why a botulism scare is huge not just for China but New Zealand as well.”

And this lovely New Zealand Dairy Industry infographic:

Reuters New Zealand Milk

Infograph Courtesy: Reuters

Thing is – the New Zealand Dollar being down 1% on the open really wasn’t the ‘chaos’ Business Insider explained it as… The average daily move of the NZD so far this year has been .73%. What they are really trying to do is get eyeballs and sell online ads – not provide actionable intel on the factors contributing to currency moves. There’s an old line about “just trying to sell newspapers”…

From our standpoint – one day’s move in the NZD doesn’t really amount to much in the grand scheme of things. Systematic strategies don’t care why the New Zealand dollar is falling, they don’t predict disruptions because of mad cow of botulism…. And they certainly don’t sell into a move because they read about it on Business Insider. If anything, a discretionary professional trader would likely buy the NZD on such news in a sort of sell the rumor, buy the fact contrarian play.

Beware those ‘trying to sell newspapers’…

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

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