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

Mexican Derivatives Market Predicts Exchange Rate and Interest Rate Coverage for 2024 as Economic Growth Drives Liquidity in Peso Futures Trading

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

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 the current interest rate 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 the 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 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 the 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.

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