Currency futures worth $9.4bn traded on DGCX

The Dubai Gold and Commodities Exchange (DGCX) has seen currency futures contracts valued at $9.4 billion (Dh34.4bn) traded since the start of 2009, said a statement from the exchange.

"Since the start of 2009, 147,000 currency futures contracts have traded on DGCX, valued at $9.4bn. This compares with 53,000 [contracts] and $4.6bn during the same period last year, representing a 104 per cent growth in the value of contracts traded for the currencies product range," DGCX said in a statement.

In addition, currency futures contracts worth $172,000 were settled in the week ending on March 20, 2009. GBP/USD and Yen/USD pairs top the currency futures trading resulting growth rate of more than 100 per cent in the current month so far as the retail investor participation spreading in the segment.

Feeling the heat of lacklustre trading on stock markets, most of the retail investors have now turned their focus to currency futures.

"Most of the activity has been focused on euro and GBP as these two currency pairs have been turned out to be favourites of market participants as dollar is weakening in the global forex markets. On the other hand, there is shifting of investment focus from gold and other commodities to currency futures," Gautam Sashittal, CFO of DGCX, told Emirates Business.

Malcolm Wall Morris, DGCX CEO, said: "The ongoing volatility in the currency markets will continue to encourage market participants to hedge their exposure to foreign currencies."

PK Sajith Kumar, Vice-President, JRG Metals and Commodities, DMCC, said: "Retail investors are moving towards currency futures because stock markets are not doing well. On the other hand, financial institutions and investment houses are in trouble in managing the public funds as they are not in a position to deliver their assured rate of returns on schemes like capital guarantee funds, etc. They are looking for other investment options and as a result of this, the participation of investment houses is also increasing significantly.

"Since there is a ban on certain countries in dealing in dollar, the activity in GBP and euros is gaining momentum," Kumar said.

Speaking to Emirates Business, P Krishna Murthy, CEO (Financial Services Division), Dubai International Securities, said: "In addition to the regular corporate hedging activity, we see a lot of retail investors participating actively in currency futures. As stock markets were under pressure, retail investors are looking at currency futures for short-term gains."

Considering the present uncertain economic conditions internationally, market participants are desperatley looking for alternative asset classes to diversify their portfolios, increase returns and better manage currency exposures.

However, Indian rupee contracts lack the brisk trading volume when compared with other pairs like GBP/USD and Yen/USD.

"First, INR/USD pair didn't catch the attention of investors and secondly it was not delivery-based. Moreover, rupee is also weakening against US dollar. Another major reason for why rupee contracts were not in limelight was lack of convertibility. Since Indian rupee is not fully convertible, liquidity is also a problem for investors," Krishna Murthy said.

Commercial institutions and retail investor participation in both the currency and commodity segments would continue to grow, said the CFO.

"We can't take delivery of INR futures outside India as RBI doesn't permit any exchange to do so. But I foresee a good demand for INR futures as there is an increasing activity of MNCs in India," said Sajith Kumar.

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