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Nondeliverable forwards: can we tell where the renminbi is headed?

Author

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  • Patrick C. Higgins
  • Owen F. Humpage

Abstract

Since the early 1990s, international banks have been offering nondeliverable forward (NDF) contracts to clients who need to hedge exposures in currencies of emerging-market economies. Many also use the exchange rate on these contracts as a best guess of where the emerging-market currency is headed. The exchange rates on NDFs, however, likely embody a substantial risk premium that interferes with forecasting accuracy.

Suggested Citation

  • Patrick C. Higgins & Owen F. Humpage, 2005. "Nondeliverable forwards: can we tell where the renminbi is headed?," Economic Commentary, Federal Reserve Bank of Cleveland, issue Sep.
    • Handle: RePEc:fip:fedcec:y:2005:i:sep1
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    Citations

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    Cited by:

    1. Sangita Misra, 2007. "Non Deliverable Foreign Exchange Forward Market: An Overview," Working Papers id:1259, eSocialSciences.
    2. Harendra Kumar Behera, 2011. "Onshore and offshore market for Indian rupee: recent evidence on volatility and shock spillover," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 4(1), pages 43-55.
    3. Jia, Fei & Shen, Yao & Ren, Junfan & Xu, Xiangyun, 2021. "The impact of offshore exchange rate expectations on onshore exchange rates: The case of Chinese RMB," The North American Journal of Economics and Finance, Elsevier, vol. 56(C).
    4. Yanping Zhao & Zaghum Umar & Xuan Vinh Vo, 2021. "Return and volatility connectedness of Chinese onshore, offshore, and forward exchange rate," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(11), pages 1843-1860, November.
    5. Wan, Xiaoli & Yan, Yuruo & Zeng, Zhixiong, 2020. "Exchange rate regimes and market integration: evidence from the dynamic relations between renminbi onshore and offshore markets," The North American Journal of Economics and Finance, Elsevier, vol. 52(C).

    More about this item

    Keywords

    Foreign exchange rates - China;

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