On first glance there appeared to be few significant changes of note when looking at the currency-specific data in the latest BIS survey. But scratch beneath the surface and this data asks some important questions, says Galen Stops. Looking at the data regarding the currencies themselves in the latest OTC FX turnover survey from the […]
LCH is now actively clearing trades on behalf of a Mexico-domiciled participant.
BBVA Bancomer completed a cleared Mexican peso denominated TIIE interest rate swap, with BBVA SA Madrid acting as the clearing broker.
The transaction marks the first time a Mexican participant has used LCH SwapClear, following LCH’s recognition as a Foreign Central Counterparty (CCP) by Banco de México earlier this month.
John Horkan, LCH Group COO and head of North America, says: “We’re excited that BBVA Bancomer has become the first Mexican participant to clear its interest rate derivatives at SwapClear. This milestone swiftly follows LCH’s recent recognition as a Foreign CCP by Banco de México, allowing Mexican entities the benefit of accessing the global liquidity available in SwapClear.”
IHS Markit’s MarkitSERV has expanded its global network of derivatives clearinghouses by connecting to Asigna, the clearinghouse for Mexican listed and standardised derivatives.
With the new connection, it will provide standardised workflow and connectivity for matching, confirming and clearing Mexican peso TIIE 28 swaps.
“With the connection between MarkitSERV and Asigna, we can offer our clients an efficient and secure channel to transmit confirmed TIIE swap data to our clearinghouse,” says Catalina Clavé Almeida, CEO at Asigna. “It also helps global banks on the MarkitSERV network do business in our market.”
The North American Free Trade Agreement (NAFTA) is the top macroeconomic issue that will affect the Mexican peso this year, according to the results of a Bloomberg foreign exchange survey announced today.
After polling more than 100 financial professionals in Mexico, Bloomberg found that 46% said that NAFTA is the macroeconomic factor that will have the biggest impact on the peso.
Meanwhile, 34% of attendees said that the peso would be most affected by the presidential election on July 1.
Galen Stops looks at the drivers behind the appreciation of the Mexican peso and asks whether the rally can continue.
Few, if any, saw this coming.
After Donald Trump won the US presidential race in November 2016, USD/MXN went from 18.03 up to 20.89, and by the time of his inauguration in January 2017, the exchange rate was up to 21.58.
This depreciation of the peso seemed eminently reasonable at the time, given that on the campaign trail Trump had promised to renegotiate the North American Free Trade Agreement (Nafta) in America’s favour or terminate the agreement altogether, not to mention building a border wall between the US and Mexico at the latter’s expense.
TriOptima has included client cleared trades in a triReduce Mexican peso compression cycle in CME Clearing for the first time.
CME Clearing and TriOptima have offered 15 compression cycles in five currencies since they started collaborating in 2016, compressing a total of $26.1 trillion in notional principal, of which $1.2 trillion is in MXN. There were 17 participants in this cycle.
Commenting on the news, Jacaranda Nava, head of derivatives trading at Banorte, says: “We are pleased to be the first Mexican bank to participate in a cleared Mexican peso compression cycle. Since we are a major participant in the derivatives market, this compression process simplifies the management of our swaps portfolio and optimises our capital requirements.”
Uncertainty regarding both financial conditions within Mexico and geopolitical developments internationally is making it hard to predict how the peso will fare in 2017.
Speaking at Profit & Loss Latin America, which took place on February 9 in Mexico City, economic experts warned that there are numerous variables that could impact the value of the Mexican currency this year, making accurate forecasts challenging.
“Uncertainty will be the name of the game this year,” explained Daniela Blancas, a financial market economist at CitiBanamex.
The Banco de Mexico (Banxico) has announced that it will offer FX hedging instruments to the market for up to US$20 billion, a move that led to a bounce in the peso and has gained approval from some local economists.
Banxico’s Foreign Exchange Commission (FEC) did not specify the exact details of the instruments that will be offered, stating that the first auction will take place on March 6 for up to US$1 billion and will be settled in Mexican pesos.
The Mexican peso dropped to a new low against the US dollar on Wednesday, in anticipation of the policies likely to be pursued under a Trump administration in the US.
MXN fell more than 2% against the USD, hitting 21.619, breaking the previous record low of 21.3952 that was set three days after Trump’s election victory on November 8.
As part of Trump’s election campaign, he has called for an overhaul of the North American Free Trade Agreement (NAFTA) and subsequently USD/MXN was often watched as a proxy on the election result during the presidential campaign and could be seen to fluctuate around the highly publicised presidential debates.
The US National Futures Association (NFA) has raised margin requirements on three currencies whilst cutting the margin required on one. The changes apply to NFA registered Forex Dealer Members (FDMs) in the US.
The NFA cites recent volatility in the currency markets as well as the margin increases implemented by exchanges CME and ICE with respect to foreign currency futures involving the Mexican peso, Japanese yen, and New Zealand dollar, in notifying members to raise margins on those three currencies.