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

Author/Editor:

Jochen M. Schmittmann ; Chua Han Teng

Publication Date:

September 4, 2020

Electronic Access:

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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.

Series:

Working Paper No. 20/179

Frequency:

regular

English

Publication Date:

September 4, 2020

ISBN/ISSN:

9781513556321/1018-5941

Stock No:

WPIEA2020179

Format:

Paper

Pages:

27

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