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Jochen M. Schmittmann
Non-deliverable forward (NDF) markets in many Asian emerging market currencies are large, rapidly growing, and often exceed onshore markets in transaction volume. NDFs tend to price significant depreciation during market stress episodes including COVID-19. Spillovers from NDFs to onshore markets are a policymaker concern. Our analysis shows that influences tend to run both ways after controlling for differences in timezones between markets. For the COVID-19 pandemic there is some evidence of NDFs leading onshore markets for a few currencies. Policy approaches to NDFs vary widely across Asia from close integration with onshore markets to severe restrictions on NDF trading.
Jochen M. Schmittmann

to DNDFs so far. That said, the IDR DNDF remains in the early development stages and BI has made efforts in 2020 to increase DNDF liquidity including by expanding the types of underlying transactions that are eligible for DNDF positions and allowing banks to include DNDFs as part of their net open FX position calculation. Figure 17. Indonesia Domestic and Offshore NDF (Exchange Rate and Difference) DNDFs tend to price in less depreciation than NDFs when the rupiah faces depreciation pressures. Sources: Bloomberg, Bank Indonesia, IMF staff Figure