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NDF-the Only Speculative Investment on Non-tradable Currencies

March 5th, 2012 | by | learn forex

Mar
05

Definition of NDF

NDF is short for non-deliverable forward. A Forex NDF is a short-term, cash-settled forward contract on a non-tradable foreign currency between two counterparties, in which the two sides agree upon a contracted Forex NDF rate on a notional amount regardless of the prevailing spot rate. And the difference between contracted Forex NDF rate and the prevailing spot rate will be calculated at the settlement date.

Normally Forex NDF is quoted and settled in U.S. dollars. And there is no trading cost before the settlement. Therefore, many international companies use Forex NDF to hedge exposure to non-convertible currencies. In general, in a Forex NDF the two counterparties will negotiate the following contents:

Face value: the profit or loss is calculated on the basis of face value

Contracted rate: the outright forward rate between the two currencies

Fixing date: the date to calculate the difference between contracted rate and the prevailing spot rate

Settlement/delivery date: the date to pay/receive the difference. Usually the fixing date is one or two business days before the settlement/delivery date

Major currencies in the Forex NDF market

However, not all non-tradable currencies have a Forex NDF market. Below is a list of major currencies in Forex NDF markets:

Asia Pacific

Europe, Middle East and Africa

Latin America

CNY Chinese Renminbi

IDR Indonesian Rupiah

INR Indian Rupee

KRW South Korean Won

MYR Malaysian Ringgit

PHP Philippine Peso

TWD Taiwan Dollar

VND Vietnamese đồng

ILS Israeli Shekel

RUB Russian Ruble

ARS Argentine Peso

BRL Brazilian Real

CLP Chilean Peso

COP Colombian Peso

GTQ Guatemalan quetzal

PEN Peruvian nuevo sol

VEB Venezuela Bolivar

 

Forex NDF trading platform

IKON Prodigy offers Non-Deliverable Forwards (NDF) of emerging markets worldwide. Brazilian Real, Russian Ruble, Indian Rupee, and Colombian Peso are among the first offered from Ikon Prodigy platform. Also the unique internal email system, the easy order placement, the real times financial news, and the user friendly interface can make your trading be a real joy.

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  • http://www.soulseller-mag.com/?p=4572 Williams

    I am not sure where you are getting your information, but good topic. I needs to spend some time learning much more or understanding more. Thanks for magnificent info I was looking for this information for my mission.

  • http://www.ideumcommunications.com/blog/?p=254 Shanel

    You actually make it seem really easy with your presentation but I to find this matter to be really something which I believe I might by no means understand. It seems too complicated and very broad for me. I’m taking a look ahead for your next post, I¡¦ll try to get the hold of it!

  • http://www.facebook.com/people/Doson-Christina/100003546168394 Doson Christina

    NDF is the most common contract in the forex market. It is safe and  costless. Normally Forex NDF is quoted and settled in U.S. dollars. And there is
    no trading cost before the settlement. Therefore, many international
    companies use Forex NDF to hedge exposure to non-convertible currencies.

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