IMF Working Papers

Offshore Currency Markets: Non-Deliverable Forwards (NDFs) in Asia

By Jochen M. Schmittmann, Chua Han Teng

September 4, 2020

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Jochen M. Schmittmann, and Chua Han Teng. Offshore Currency Markets: Non-Deliverable Forwards (NDFs) in Asia, (USA: International Monetary Fund, 2020) accessed December 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Non-deliverable forward (NDF) markets in many Asian emerging market currencies are large, rapidly growing, and often exceed onshore markets in transaction volume. NDFs tend to price significant depreciation during market stress episodes including COVID-19. Spillovers from NDFs to onshore markets are a policymaker concern. Our analysis shows that influences tend to run both ways after controlling for differences in timezones between markets. For the COVID-19 pandemic there is some evidence of NDFs leading onshore markets for a few currencies. Policy approaches to NDFs vary widely across Asia from close integration with onshore markets to severe restrictions on NDF trading.

Subject: Banking, COVID-19, Currencies, Currency markets, Depreciation, Financial markets, Financial sector policy and analysis, Foreign exchange, Health, Money, National accounts, Spillovers

Keywords: Asia and Pacific, COVID-19, Currencies, Currency Markets, Depreciation, DNDF, DNDF liquidity, DNDF position, East Asia, Emerging market, Global, Indian rupee, MYR NDF trading, NDF, NDF data, NDF market, NDF pricing, NDF trading, NDF volume, Non-Deliverable Forwards, Offshore Markets, Onshore market, Philippine peso, South Asia, Spillovers, Trading hub, Transaction volume, WP

Publication Details

  • Pages:

    27

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2020/179

  • Stock No:

    WPIEA2020179

  • ISBN:

    9781513556321

  • ISSN:

    1018-5941

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