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| Renminbi Non-Deliverable Forward Transactions |
Renminbi Non-Deliverable Forward ("RMB NDF") is a foreign exchange derivative product that offers a tool for investors to hedge their Renminbi exposures. |
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Product Features
- Minimum notional amount (contract amount) : USD10,000
- Tenor: 1, 2, 3, 6 and 12 months
- Settlement Currency: USD
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How it Works?
- On the Trade Date, the Bank will confirm the Forward Rate with customers
- On the Valuation Date (2 business days before the Settlement Date), the Bank will confirm the Settlement Rate (being the closing rate of USD/RMB which is announced by the People’s Bank of China at http://www.pbc.gov.cn on the valuation day)
- On the Settlement Date, (A) if the settlement currency amount is a positive number, the Reference Currency Buyer (i.e. RMB Buyer) will pay that amount in USD to the Reference Currency Seller (i.e. RMB Seller); (B) if the settlement currency amount is a negative number, the Reference Currency Seller (i.e. RMB Seller) will pay the absolute value of the amount in USD to Reference Currency Buyer (i.e. RMB Buyer).
Illustration example
- Notional Amount: USD100,000
- 1 Year USD Fixed Deposit Interest Rate: 2.80% p.a
- Customer Buy / Sell : RMB / USD
- Forward Rate: 8.0
- Tenor : 12 months
- Settlement Rate: 7.9
On the Settlement Date, customer will receive
| (1) |
Time Deposit + Interest
= USD100,000 x (1 + 2.8%) = USD100,000 + USD2,800 = USD102,800 |
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| (2) |
RMB NDF Settlement Amount
= USD100,000 x (1 - 8.0 / 7.9) = USD100,000 x (- 0.01266) = - USD1,266
Under this situation, Customer gains USD1,266 as the currency settlement currency is negative number, the RMB seller will pay the absolute value of the amount in USD to RMB Buyer
Final Settlement = (1) + (2) = USD102,800 + USD1,266 = USD104,066 |
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| Risk Disclosure |
- This product is a non-deliverable forward in respect of Renminbi which will be settled in U.S. dollars.
- Prior to investing in this product, Customers should read the general terms and conditions and the product specific information contained in the Confirmation in relation to the Transaction, together with any other terms or customer agreements to which the Transaction may be subject. The Confirmation will be provided by the Bank.
- This product is not principal protected. Customers bear a foreign exchange risk should the exchange rate between the Renminbi and the US change between the time the Transaction is entered into and the time it is settled.
- Customers should note that these are illiquid instruments which are not transferable or tradeable. Customers should therefore be prepared to hold this investment until the settlement date.
- Customers assume the full credit risk of the Bank.
- Customers must make their own independent decision as to whether and on what terms to enter into a Transaction and should take professional advice as appropriate.
- Customers acknowledge that the Bank or an affiliate may be requested to provide a quotation or quotations from time to time for the purpose of determining the Settlement Rate used for the purposes of a Transaction and such quotation(s) may affect, materially or otherwise, the settlement of that Transaction.
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