Dipo Olowookere
Quantitative Financial Analytics
Trading volume in Nigerian Currency Futures Market recorded the highest daily trading volume on Monday, February 20, 2017 with 104.32 contracts changing hands by the end of the day. That is the highest daily trading since 2017.
Trading in the currency futures market has been relatively dull in February until Monday. Before yesterday’s trading surge, only 90.23 contracts were traded for the entire month of February, an 8.2 daily average volume.
The surge was led by NGUS JAN 31 2018 which recorded 90.74 contracts, the highest daily trade on that contract since it was introduced as a replacement to NGUS JAN 25 2017.
Per Currency Futures Transactional analysis and tracking by Quantitative Financial Analytics, the highest daily trading ever recorded was on August 1, 2016 when 347.69 contracts were traded followed by 272.58 contracts traded on August 29th 2016. Today’s high volume is therefore the 6th highest daily trading ever to be recorded in the currency futures market since being introduced in June 2016.
It is however not very apparent what led to the spike but it may not be unconnected with the upcoming anticipated price hike from the CBN following the maturity of the NGUS FEB 22 2017 currency future in two days’ time.
It has been the character of the CBN to increase futures prices at the expiration or maturity of a futures contract.
The recent free fall of the Nigeria versus the US Dollar and other hard currencies may also be responsible for the spike as investors strive to hedge their currency risk exposures with currency futures
Open interest in currency futures now stands at 4,033.01 contracts according to information on the FMDQ web site.
