According to José Miguel de Dios, general director of the Mexican Derivatives Market (MexDer), financial coverage for investors in retail or institutional sectors such as Afores or investment funds will focus on the exchange rate (peso-dollar) and interest rates in 2024. The director of the derivatives exchange in Mexico assured that during 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, pay for inputs, take out a loan, or protect an investment.
However, 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, will lead to extreme volatility in investors’ portfolios. This is likely to cause high fluctuations in retirement workers’ and retail investors’ assets.
In contrast, Mexican peso futures contracts on the Chicago Mercantile Exchange (CME) Group reached a record average daily volume of $1.8 billion 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 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 its best year ever against US currency with a gain of 13 percent. Bernardo Gattass, head of volatility trading at Itaú added that many large global institutional investors should consider adding 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 that currency futures operations in Latin America reached an all-time high of $300 million in equivalent benchmark ADV for Brazilian real futures contracts.