DNDFs: a more efficient way to intervene in FX markets? by Marcio G. P. Garcia and Tony Volpon published by PUC/Rio. “we analyze the unique intervention strategy of the BCB using DNDFs (Domestic-Non-Deliverable Forwards): currency forwards that settle in domestic currency. We show the mechanisms through which DNDFs provide efficient hedging instruments for economic agents in times of reduced capital inflows and FX volatility, and how the use of DNDFs provide incentives for commercial banks to bring dollar to Brazil and so help finance the current account deficit…”
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