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

Financial analysts predict that in 2024, retail or institutional investors such as Afores and investment funds will focus on the exchange rate (peso-dollar) and interest rates to reduce their risks, according to José Miguel de Dios, general director of the Mexican Derivatives Market (MexDer). This election year and interest rate movements will cause volatility in investors’ portfolios, making it a year of extreme volatility in the financial market.

Meanwhile, Mexican peso futures contracts on the Chicago Mercantile Exchange (CME) Group reached a record average daily volume in 2023 due to greater liquidity and broader client participation. The continued growth of the Mexican economy, combined with the current interest rate environment, is leading more clients to trade currency futures at CME Group.

Paul Houston, global head of foreign exchange products at CME Group, explained that as client participation continues to increase, they are focused on creating and maintaining continued liquidity that will support the long-term development of electronic foreign exchange markets in Latin America. The Mexican peso ended 2023 as the best year in its history, with a gain of 13 percent against the US currency.

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 the liquidity of both market makers global as well as local. He gave an example of currency futures operations in Latin America in 2023: Mexican peso contracts reached a record $1.8 billion in average daily volume (ADV) of the equivalent reference value. Brazilian real futures also reached an all-time high of $300 million in the equivalent benchmark ADV.

By Editor

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