A Non-Deliverable Forwards (NDF) is a forward contract on an inconvertible currency that cannot be settled by delivery of the underlying. The physical exchange of currency at expiry is replaced by settlement between counterparties based on the net difference between the exchange rate listed in the contract and the fixing rate. One party pays the other that difference in USD.
A NDF is used when the client needs to hedge against a currency that does not have a deliverable market offshore, including Indian Rupee (INR), Taiwan Dollar (TWD), Korean Won (KRW), Chinese Yuan (CNY), Brazilian Real (BRL), and Argentinean Pesos (ARS). Multinational corporations sometimes use non-deliverable forwards to hedge against risk associated with comparatively illiquid currencies, non-convertible currencies. Hence NDFs provide an offshore mechanism to hedge currencies which were previously considered "unhedgeable"; either due to emerging markets, illiquidity or regulatory constraints.
Benefits of NDF Trading
exchange of principal funds.
regime being maintained (apart from the fixing at maturity).
You can trade USD/INR NDF with Ong First now on our MaxxTrader platform!
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