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.

  1. Hedge

    Making an investment to reduce the risk of adverse price movements ...
  2. Economic Exposure

    A type of foreign exchange exposure caused by the effect of unexpected ...
  3. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  4. Transaction Exposure

    The risk, faced by companies involved in international trade, ...
  5. Forex - FX

    The market in which currencies are traded. The forex market is ...
  6. Currency

    Currency is a generally accepted form of money, including coins ...
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