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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

exceed all other FX products including spot trading. This underscores the importance of NDF markets for price discovery and relevance from policymakers’ perspective. Figure 2. BIS Survey: Daily Transaction Volumes by FX Instrument (Billions of US Dollars) NDFs account for the largest share of trading by instrument for INR, KRW, and TWD. Sources: Bank For International Settlements, IMF staff. Note: Currency swaps account for an average of 0.4% of trading volume across the currencies Bank of England NDF volume data for London, the world’s largest NDF

International Monetary Fund. Asia and Pacific Dept

the introduction of the policy measures, the success of these measures is self-evident: market adjustments have taken place and the authorities have seen encouraging signs of improvement: a. The onshore FX market has been sustained, recording daily average volume of USD9.2 billion across all types of FX transactions, with spot and forward market transactions, particularly for ringgit currency pair, of above USD2 billion, similar to the level recorded in December 2016. b. The NDF volume has reportedly declined by 75 percent and adverse spillovers have been

International Monetary Fund. Asia and Pacific Dept
This 2017 Article IV Consultation highlights the Malaysian economy’s good performance over the past few years in a challenging global economic environment. Despite the impact of global commodity price and financial market volatility, the economy remained resilient, thanks to a diversified production and export base, strong balance sheet positions, a flexible exchange rate, responsive macroeconomic policies, and deep financial markets. Although real GDP growth slowed, Malaysia is still among the fastest-growing economies among its peers. Real GDP growth is expected to increase moderately to 4.5 percent year over year in 2017 from 4.2 percent in 2016. Domestic demand, led by private consumption, continues to be the main driver of growth.