Currency Risks and High Rates are the Main Focus of Hedging Contracts

Mexico’s Peso-Dollar Exchange Rate and Interest Rates to be Key Focus of Investors in 2024: CME Group Continues to Grow

In 2024, financial coverage for retail or 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).

As Mexico approaches its presidential elections in 2024 and interest rates begin to move, investors will rely on exchange rate and interest rate futures or options to manage their risks related to shocks in the exchange rate, inputs costs, loans or investments. This year is expected to be one of extreme volatility in the financial market due to the uncertainty created by the elections in Mexico and the United States.

Investors’ portfolios are likely to experience volatility as a result of these factors. However, this year will also see continued growth in Mexican peso futures contracts on the Chicago Mercantile Exchange (CME) Group. The world’s leading derivatives market has already reached a record average daily volume for Mexican peso futures contracts in 2023.

The continued growth of the Mexican economy and current interest rate environment are driving more clients to trade currency futures at CME Group. The Mexican peso ended 2023 as its best year in history with a gain of 13 percent against the US currency. As client participation continues to increase at CME Group, they are focused on maintaining liquidity that will support long-term development of electronic foreign exchange markets in Latin America.

Bernardo Gattass, head of volatility trading at Itaú explained that many large global institutional investors would benefit from adding CME Group to their lists of price providers for Latin American currencies so they can take advantage of global market makers liquidity as well as local. He gave an example that currency futures operations in Latin America reached an all-time high of $1.8 billion ADV for Mexican pesos and Brazilian real futures also reached an all-time high of $300 million ADV for reference value benchmark respectively.

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