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it seems non convertible (eg CNY) or partially convertible (eg BRL) may be due to capital controls or a currency only used domestically. I was then wondering what is the difference between a non-convertible and a non-deliverable currency?

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(A good book on emerging markets FX is:

https://www.amazon.com/Trading-Fixed-Income-Emerging-Markets-dp-1119598990/dp/1119598990/ https://www.wiley.com/en-us/Trading+Fixed+Income+and+FX+in+Emerging+Markets%3A+A+Practitioner%27s+Guide-p-9781119598992 Dirk Willer, Ram Bala Chandran, Kenneth Lam. Trading Fixed Income and FX in Emerging Markets - A Practitioner's Guide. Wiley 2020 . Disclaimer - I may know them.)

Also Credit Suisse EM Currency Handbook (2013) may help.

Currencies are traded as NDFs either because the physical delivery is thinly traded or because the currency is non-convertible.

Non-convertible is not always absolute. For example, Brazil reais BRL are convertible through onshore banks (not easy). Chilean peso (CLP) and Colombian peso (COP) are non-convertible. For all 3 example, it is easy to trade NDFs.

Likewise in Asia, it is easy to trade NDFs on Indian rupee INR, Indonesian rupiah IDR, Taiwan Dollar TWD, Philippine peso PHP, South Korean Won KRW.

But, for example, the desk where I worked once (exactly) needed to do a Paraguayan Guarani PYG NDF. You cannot find it on the usual venues. There is no standard EMTA template. But as long as you have a counterpary, and agree on technical detals, like how you will observe the fixing, you can do over the counter contracts. But this was not easy operationally. Non-delivery currency means that the NDF market is easily accessible.

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  • $\begingroup$ Thanks.So it seems non deliverable and non convertible are somehow linked. Non convertible refers to spot transactions (CNY used only in the domestic market), while non deliverable refers to the derivative market where you use NDFs for currencies that are non convertible or partially convertible (spot market is very thin, eg BRL). Is this correct? $\endgroup$ – Student Mar 23 at 11:22

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