TreasureX Researchbis.wpOffshore Currency Bets Move Emerging-Market Exchange Rates
Gerardo Ferrara, Andreas Schrimpf, Ganesh Viswanath-Natraj, Zijie Wang · October 16, 2026
New research from the Bank for International Settlements examines how trading in offshore non-deliverable forwards (NDFs) — derivative contracts that let investors bet on currencies they cannot freely trade onshore — spills over into domestic exchange rates. The authors use transaction-level records covering the full universe of centrally cleared NDFs for ten emerging-market currencies from 2013 to 2025, a level of detail rarely available in this market.
The core finding: order flow in offshore NDFs moves not only offshore forward prices but also the domestic spot rate, and it widens the gap between offshore and onshore forward rates. In other words, pressure built up outside a country's borders transmits inward, even when local authorities try to manage the currency.
Why it matters: emerging-market central banks often treat offshore derivatives as a side channel, focusing their interventions on the onshore market. This work suggests that approach may be insufficient — offshore positioning is itself a transmission mechanism. For investors, the practical implication is that NDF flows carry information about near-term spot moves and about onshore-offshore pricing gaps, which can signal stress or intervention risk. For policymakers, monitoring offshore order flow could improve early warning of currency pressure and make interventions more effective.
Source: Bank for International Settlements working paper, "Offshore forwards and exchange rate transmission in emerging markets." Read the original: https://www.bis.org/publications/working-paper-1383-offshore-forwards-and-exchange-rate-transmission-emerging-markets
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