Currency risk and high rates are the main focus of hedging contracts

In 2024, financial coverage for retail and institutional investors will focus on the exchange rate (peso-dollar) and interest rates, according to José Miguel de Dios, general director of the Mexican Derivatives Market (MexDer). The director of the derivatives exchange in Mexico predicts that in this election year and with interest rate movements, investors will use exchange rate and interest rate futures or options to cover their risks.

The volatility generated by the elections in Mexico and the United States, as well as the start of the first decreases in central banks’ reference rates, is expected to create volatility in investors’ portfolios. This year will be a year of extreme volatility in the financial market, which raises the possibility of high fluctuations in assets of retirement workers and retail investors.

Meanwhile, Mexican peso futures contracts on the Chicago Mercantile Exchange (CME) Group reached a record average daily volume in 2023. The continued growth of the Mexican economy combined with current interest rates has led more clients to trade currency futures at CME Group. As client participation continues to increase, they are focused on creating and maintaining liquidity that supports long-term development electronic foreign exchange markets in Latin America. The Mexican peso ended 2023 as its best year ever, gaining 13 percent against US currency and closing at 16.96 units per dollar spot.

Bernardo Gattass, head of volatility trading at Itaú explained that many large global institutional investors would do well to add CME Group to their lists of price providers for Latin American currencies so that they can take advantage of its liquidity both globally and locally. He gave an example: currency futures operations in Latin America reached an all-time high of $1.8 billion per day in average daily volume (ADV) equivalent reference value last year. Brazilian real futures also reached an all-time high last year with $300 million ADV equivalent benchmark value.

By Editor

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