There are many people who feel that “Turkish lira is a good target for swap points.” Focusing only on the policy interest rate, the Turkish lira is even higher than the Mexican peso. However, the Mexican Peso Yen also has the characteristic of being easy to operate for a long time. Below we will introduce the characteristics of the Mexican peso while comparing it with other high-interest currencies, and explain the operation method to prevent stop out as much as possible.
- Compared to other high interest rate currencies such as Turkish lira, price movements tend to be slower.
- Compared with around 2015 when 1 Mexican peso = 7 to 8 cents, it was 4 to 6 cents in 2020, and the cheaper price continues.
- Mexican pesos are cheaper than other high interest currencies, so you can hold more than other high interest currencies with the same funds.
- However, even though the price movements are gradual, there are risks, so it is important to manage the FX risk by separating the stop out line from the holding position by 3 cents or more.
- You should pay attention to currency fluctuations even when trading with FX swap points.
Even if you are trading for swap points, be sure to check daily exchange rate fluctuations. If the market changes suddenly, there is a possibility that the fluctuation loss will be larger than the accumulated swap.
Characteristics of Mexican peso (MXN)
Mexico is an emerging country blessed with abundant natural resources such as “crude oil” and “natural gas”, and is characterized by being easily affected by the US economy. This is because the United States is adjacent to Mexico’s huge export and import trading countries. The currency is “Mexican Peso” and the universal currency code is “MXN”. Therefore, it becomes “USD/MXN” when it becomes a currency pair with USD. Looking at the price movement of “USD/MXN”, the market price has been around 5 – 6 cents range for the past few years, and there is a strong desire to buy in the first half of 5 cents and a strong desire to sell in the first half of 6 cents. From around 2013 to 2015, the level remained above 7 – 8 cents, so there are many traders who want to hold a buying position in the 5 cents range, which is cheap, and it can be a great advantage to hold positions for the long term. Next, let’s look into the Mexican peso from the perspective of swap management.
Merit of trading Mexican peso (MXN)
The Mexican peso has a current policy interest rate of “5.00%” in 2020, and this is the highest level since 2008. It seems that there are many FX traders who want to operate swap on this opportunity. Other currencies with high interest rates include Turkish lira (policy interest rate: 8.25%) and South African rand (policy interest rate: 3.75%), but the Mexican peso has its own attractiveness unlike other high interest rate currencies. There are two things that are unique to the Mexican peso.
1. Rate fluctuation range is narrower than other high interest rate currencies
Looking at the range of price movements so far, the range price is about 5 to 8 cents from 2010 to 2020, so it is “3 cents price range in 10 years”. By the way, since the Turkish lira had a price range of about 40 cents in 10 years and the South African rand had a price range of about 6 cents, you can see the narrow price range of the Mexican peso by comparison. In fact, Mexico’s rating is highly valued compared to other high interest rate countries. To begin with, a rating is an index used to improve national stability and creditworthiness. These ratings are finely ranked and evaluated by three major rating agencies, Moody’s, S&P and Fitch. Although it cannot be said unequivocally because the rating changes with each announcement, Mexico’s rating in recent years has been stable and has gained higher credibility than other high interest rate countries.
2. Mexican peso” is cheap
One Mexican peso costs about 5 to 6 cents, but 1 Turkish lira costs about 21 cents, and 1 South African rand costs about 8 cents, so you can hold more positions than the Turkish lira with the same amount of money without burden. In addition, since spreads tend to be narrower among the three high-interest currencies, it is also attractive to be able to suppress the actual commission (spread) when holding a long position. If you don’t know anything about swap points yet, go to the page here.
Using High Leverage to Earn More Swap Points
There are many people who look at the above-mentioned conditions and wonder, “Is it possible to make more profit by using higher leverage?”. For example, let’s say you have an investment fund of 10,000 USD, a loss cut of 100% margin rate, 1 Mexican peso = 5.6 cents, and you have a long position with a currency pair of US dollar and Mexican peso. If you trade at 100 times higher leverage under these conditions, the transaction volume will be 180,000 currencies and the daily swap point will be 270 USD. In this case, the annual swap point will be about 98,000 USD, but if the exchange rate becomes “5.256”, it will be lost (just by 0.3 cents lower). In this way, with high leverage, the price range up to the stop out rate is narrow (there is no free money in the FX account), so you will be cut off without having to accumulate swap points. However, since the USS/MXN has the characteristic that the fluctuation range is narrow (about 3 cents in 10 years), the stop out rate should be separated from the holding position by 3 cents or more (the stop loss should be 5 cents or less for the 8 cents buying position). However, it can be said to be one guideline for long-term operation. With FX overseas, you can utilize up to 1:1000 high leverage to trade FX. Visit the page here to find out more about opening an overseas account.
Find the best broker for Swap Points
When searching for a FX company aiming for swap points, the following three points are prerequisites. The spread is stable and the execution quality is excellent. Even if there is a sudden change, the order execution is firm and the spread is difficult to spread. >> See FX spread comparison here USD/MXN has high swap points. >> See FX swap-point comparison here Proven as a stable FX company for song-term swap operation. >> See recommended FX companies here