What are NDF used for?

Non-deliverable forwards are used as a short-term way to settle currency exchanges between counterparties. A settlement date is agreed upon and put into the NDF contract.

What is a non-deliverable forward and why does it exist?

A non-deliverable forward (NDF) is a cash-settled, and usually short-term, forward contract. The notional amount is never exchanged, hence the name “non-deliverable.” Two parties agree to take opposite sides of a transaction for a set amount of money—at a contracted rate, in the case of a currency NDF.

Is China exchange rate fixed or floating?

China does not have a floating exchange rate that is determined by market forces, as is the case with most advanced economies. Instead it pegs its currency, the yuan (or renminbi), to the U.S. dollar. The yuan was pegged to the greenback at 8.28 to the dollar for more than a decade starting in 1994.

Why is China moving from a fixed exchange rate to a flexible exchange rate?

China’s exchange rate regime has undergone gradual reform. A flexible, market-determined exchange rate is needed to help absorb external shocks and maintain the People’s Bank of China’s (PBC) ability to use monetary policy to affect domestic economic conditions.

What is the main difference in NDF and deliverable forward?

in an NDF, you agree to a forward rate based on the interest rate differential (as normal). At the end of the contract however, it’s settled by the difference between the forward rate and today’s spot rate in the DELIVERABLE CURRENCY. the settlement currency will be only one: the deliverable currency.

What is non convertible forward?

Non-Convertible Currency and NDF NDFs are cash-settled and usually structured as short-term forward currency contracts. An NDF contract can thus give a trader exposure to the Chinese renminbi, Indian rupee, South Korean won, new Taiwan dollar, Brazilian real, and other nonconvertible currencies.

What is non-deliverable option?

A Non-Deliverable FX option (NDO) offers the right but not the obligation to buy or sell an agreed amount of one currency in exchange for an agreed amount of another currency at a specified future exchange rate (the strike price), but using a net cash settlement made by one party to another based on the difference of …

Which country follow fixed rate?

There are also four countries that maintain a fixed exchange rate, but for a basket of currencies rather than a single currency: Fiji, Kuwait, Morocco, and Libya. Loosely fixed currencies: These countries fix their currencies to a trading range tied to either a single or a basket of currencies.

Is RMB and CNY same?

Chinese money, however, comes by two names: the Yuan (CNY) and the people’s renminbi (RMB). The distinction is subtle: while renminbi is the official currency of China where it acts as a medium of exchange, the yuan is the unit of account of the country’s economic and financial system.

Does Japan have a fixed or floating exchange rate?

In 1973, Japan moved to a floating exchange rate system. The current exchange rate of the yen, when measured by the real effective exchange rate, which roughly indicates the international competitiveness of Japanese businesses, is about 30 percent below the average rate over the nearly half century since 1973.

What is NDF in animal nutrition?

Neutral detergent fiber (NDF) is the most common measure of fiber used for animal feed analysis, but it does not represent a unique class of chemical compounds. NDF measures most of the structural components in plant cells (i.e. lignin, hemicellulose and cellulose), but not pectin.

What does non-convertible mean?

Definition of nonconvertible : not convertible: such as. a : not able to be exchanged for a specified equivalent nonconvertible currencies. b : not having a top that may be lowered or removed a nonconvertible car.