BIS Working Paper: How Offshore Non-Deliverable Forward Markets Transmit Exchange Rate Pressure in Emerging Markets

The Bank for International Settlements (BIS) has released a working paper that studies the transmission effects of offshore NDF markets on onshore spot exchange rates, using centralized clearing NDF transaction-level data for 10 emerging market currencies from 2013 to 2025. The study shows that a $1 billion long USD order flow causes the onshore spot exchange rate to depreciate by approximately 10 basis points, while the offshore NDF exchange rate moves by about 18 basis points, and offshore transactions widen the spread between offshore and onshore rates; when dealer balance sheets are strained, the impact on the spot exchange rate is larger.