Non Deliverable Forwards (NDFs)

In recent years,markets have developed for some currencies in “non-deliverable forwards.” This instrument is in concept similar to an outright forward, except that there is no physical delivery or transfer of the local currency.
Rather, the agreement calls for settlement of the net amount in dollars or other major transaction currency.
NDFs can thus be arranged offshore without the need for access to the local currency markets, and they broaden hedging opportunities against exchange rate risk in some currencies otherwise
considered unhedgeable.
Use of NDFs with respect to certain currencies in Asia and elsewhere is growing rapidly.