EBS BrokerTec added a new nondeliverable forward
(NDF) instrument, one month against the fix, to be called TOD/TOM (today/tomorrow).
This is an off-balance-sheet exposure and is generally hedged via forward contract or a nondeliverable forward
Premier Wen Jiabao, speaking at a wide-ranging, three-hour news conference at the end of China's legislative session, said the yuan has gained 30 percent in real terms since 2005 and has moved up and down since September in Hong Kong trading of nondeliverable forward
The forward contract often took the form of a nondeliverable forward
, under which dollar payments were made by reference to movements in the spot dollar-to-ruble rate.
But the share of dollar deposits continued to decline despite some stabilization at the margin in the interest differential in 2002, pointing to an additional catalyst--rising expectations of renminbi appreciation, as indicated by the RMB/$ forward exchange rate in the nondeliverable forward
market (Ma and McCauley 2003).
At the start of this year, a new BSP ruling imposing a cap on banks' holdings of nondeliverable forwards
(NDFs) took effect.
Importantly, the final determination doesn't extend to other FX derivatives, such as FX options, currency swaps, and nondeliverable forwards
Since the early 1990s, however, some international banks have been offering an offshore, over-the-counter market in nondeliverable forwards
(NDFs) for many emerging-market currencies, including the Chinese renminbi.
Recently, a market in nondeliverable forwards
(NDFs) has arisen to provide cover for companies trading in renminbi.
Also, the BSP earlier this year slapped a higher capital charge on purchases by banks of nondeliverable forwards
In January, the BSP imposed higher capitalization requirement on banks' holdings of nondeliverable forwards
(NDFs)--a hedging instrument meant for clients of banks engaged in export and import activities--to discourage excessive investments in them.