Overnight Limit

DEFINITION of 'Overnight Limit'

The number of currency positions a trader can carry over from one trading day until the next. The central bank that regulates the bank or financial institution where the positions are held sets the overnight limit. These limits are reviewed on an ongoing basis.




BREAKING DOWN 'Overnight Limit'

Overnight limits are preventative measures enacted by central banks to keep financial institutions from accumulating more currency exposure than can be hedged by the close of the trading day. This also has the effect of making financial institutions keep a closer eye on exposure to exchange rate movements throughout the day. Central banks can also set intraday limits to mitigate risk in the foreign exchange market.

RELATED TERMS
  1. Overnight Rate

    The interest rate at which a depository institution lends immediately ...
  2. Overnight Position

    Trading positions not closed by the end of the trading day and ...
  3. Regulation F

    A regulation set forth by the Federal Reserve. Regulation F specifies ...
  4. At Limit

    An order that sets a maximum limit on the buy price and/or a ...
  5. Overnight Return

    One of the two components of the total daily return generated ...
  6. Legal Lending Limit

    The aggregate maximum dollar amount that a single bank can lend ...
Related Articles
  1. Managing Wealth

    What Is The Bank For International Settlements?

    Get the scoop on the structure and functions of the oldest global financial institution.
  2. Markets

    What Does a Central Bank Do?

    A central bank oversees a nation’s monetary system.
  3. Markets

    What Are Central Banks?

    They print money, they control inflation, and much, much more. All you need to know about central banks is here.
  4. Markets

    Can Bitcoin Kill Central Banks?

    Bitcoin is a peer-to-peer unofficial currency that operates without government or central bank oversight. Can Bitcoin kill off the need for central banks?
  5. Markets

    How Central Banks Control The Supply Of Money

    A look at the ways central banks pump or drain money from the economy to keep it healthy.
  6. Trading

    The Forex Market: Who Trades Currency And Why

    The forex market has a lot of unique attributes that may come as a surprise for new traders.
  7. Markets

    What's the Federal Funds Rate?

    The federal funds rate is the interest rate banks charge each other for overnight loans to meet their reserve requirements.
  8. Markets

    Overnight Rate

    Learn about how banks use this interest rate when lending to other banks.
  9. Trading

    Forex Trading: A Beginner's Guide

    Learn about the forex market and some beginner trading strategies to get started.
  10. Markets

    What Do the Federal Reserve Banks Do?

    These 12 regional banks are involved with four general tasks: formulate monetary policy, supervise financial institutions, facilitate government policy and provide payment services.
RELATED FAQS
  1. What are the major categories of financial institutions and what are their primary ...

    Understand the various types of financial institutions that exist in today's economy, and learn the purpose each serves in ... Read Answer >>
  2. How do central bank decisions affect volatility?

    Using an aggregate, macroeconomic perspective, take a look at how some of the ways central bank decisions can impact market ... Read Answer >>
  3. What are key government regulations that affect investing in the banking sector?

    Discover how the global financial crisis of 2008 changed the face of banking in the United States and around the world by ... Read Answer >>
  4. How do central banks acquire currency reserves and how much are they required to ...

    A currency reserve is a currency that is held in large amounts by governments and other institutions as part of their foreign ... Read Answer >>
  5. How does investment banking differ from commercial banking?

    Discover how investment banking differs from commercial banking, the responsibilities of each and how the two can be combined ... Read Answer >>
  6. How can I invest in a foreign exchange market?

    The foreign exchange market, also called the currency market or forex (FX), is the world's largest financial market, accounting ... Read Answer >>
Hot Definitions
  1. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  2. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  3. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  4. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  5. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  6. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
Trading Center