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

Patrick Higgins and Owen Humpage

Economic Commentary, 2005, issue Sep

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.

Keywords: Foreign; exchange; rates; -; China (search for similar items in EconPapers)
Date: 2005
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