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28 March 2024

Hedging pushes up currency futures volume on DGCX

Volume in euro/dollar futures trading on DGCX rose by 71 per cent to 23,656 contracts in April. (EB FILE)

Published
By CL Jose

Exporters and importers are flocking to the currency futures market to hedge their exposure in different currencies as high volatility poses risk to their already thin margins, according to brokers.

The Dubai Gold & Commodities Exchange (DGCX) said the exchange is launching Australian dollar/US dollar, Canadian dollar/US dollar and Swiss Franc/US dollar on June 15, 2010.

The sustained growth in currency futures led trading activity on the exchange in April with 67,542 contracts recorded, a year-on-year increase of 168 per cent, reflecting the increased interest in forex trading in the region.

The exchange yesterday announced that 107,641 contracts across all futures were recorded in April, a nine per cent increase over the same period last year and valued at $6.12 billion

"More and more currency traders are seeing the volatility in currencies as an opportunity to make a quick buck from the brisk movement of currencies as the euro, yen and GBP witness the highest volatility," said Sajith Kumar PK, director and chief executive of JRG Securities.

Talking to Emirates Business, an importer said the times are tough as the business is down and the margins are under pressure. "We cannot afford to take a hit from an exchange loss too now," he added.

The volumes in the currency futures trading have seen high levels. April 2010 volume in euro/dollar futures rose by 71 per cent to 23,656 contracts, while sterling/dollar futures were 229 per cent higher at 23,285 contracts. Indian rupee/dollar and yen/dollar futures recorded increases of 170 per cent and 2031 per cent, with 10,285 and 10,316 contracts traded respectively.

However, volume for gold and WTI crude oil futures, at 31,037 contracts and 6,570 contracts respectively, declined compared with that of the same period last year.

About the uptrend in trading, Eric Hasham, Chief Executive Officer, DGCX, said there is an increased interest in currency futures. "It is in response to the increased demand and feedback from members, the DGCX has decided to widen its forex offering, which will enable participants to gain exposure to the world's most-traded currencies."

In the January-April period, the DGCX achieved an impressive volume growth of 94 per cent, to reach a year-to-date (YTD) volume of 602,700 contracts. Valued at $35.7 billion, the YTD volume was largely driven by currency and gold futures. While YTD gold futures volume rose 51 per cent, currencies saw considerable across-the-board growth, with euro/dollar and sterling/dollar futures up 46 per cent and 393 per cent respectively. The increases in Indian rupee/dollar and yen/dollar futures were 276 per cent and 1789 per cent.

Overall, DGCX currency futures have recorded YTD volume of 429,302 contracts, an increase of 133 per cent over last year.