• Fri. Mar 1st, 2024

2024: Retail and Institutional Investors to Focus on Exchange Rate and Interest Rates Futures Amid Volatility in the Financial Market


Feb 12, 2024
Currency risk and high rates are the main focus of hedging contracts

In 2024, financial coverage for retail and institutional investors, such as Afores or investment funds, will focus on the exchange rate (peso-dollar) and interest rates, predicts José Miguel de Dios, general director of the Mexican Derivatives Market (MexDer). The director of the derivatives exchange in Mexico assured that in this election year and interest rate movements, investors will use exchange rate and interest rate futures or options to cover their risks of shocks in the exchange rate, to pay for inputs, a loan or to protect an investment.

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

Meanwhile, amid greater liquidity and broader client participation, 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 environment is leading more clients to trade currency futures at CME Group. As client participation continues to increase they are focused on creating and maintaining continued liquidity that will support long term development of electronic foreign exchange markets in Latin America. The Mexican peso ended 2023 as one of its best years ever with a gain of 13 percent against 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 they can take advantage of liquidity both global as well as local market makers. He gave an example: currency futures operations for Brazilian real also reached an all-time high $300 million equivalent benchmark ADV

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