Overnight Limit

AAA

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.




INVESTOPEDIA EXPLAINS '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. Economic Exposure

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

    The price of a nation’s currency in terms of another currency. ...
  3. Hedge

    Making an investment to reduce the risk of adverse price movements ...
  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. Transfer Risk

    The risk that a local currency cannot be converted into the currency ...
RELATED FAQS
  1. What is each party's role in a reverse repurchase agreement?

    There are two principal parties in a reverse repurchase agreement. The first party, often called the seller, is offering ... Read Full Answer >>
  2. What are some of the major regulatory agencies responsible for overseeing financial ...

    There are a number of agencies assigned to regulate and oversee financial institutions and financial markets, including the ... Read Full Answer >>
  3. What risks does the dealer (lender) in a reverse repurchase agreement take on?

    In a conventional repurchase agreement, or repo, the dealer is the borrower and takes on similar risks to borrowers in other ... Read Full Answer >>
  4. What do banks do to control the bank reserve?

    While all banks are required to maintain a specific amount of bank reserves, the banks themselves do not control the minimum ... Read Full Answer >>
  5. How does wage price spiral impact interest rates?

    A wage-price spiral occurs when wages and prices rise in tandem in a self-perpetuating cycle that exerts inflationary pressure ... Read Full Answer >>
  6. What is the difference between the deposit multiplier and the money multiplier?

    The terms "deposit multiplier" and "money multiplier" are often confused and used interchangeably, because they are very ... Read Full Answer >>
Related Articles
  1. Forex Education

    The Fundamentals Of Forex Fundamentals

    Charting is not the only way to analyze the foreign-exchange market. Learn how to apply fundamental analysis to the economic indicators.
  2. Options & Futures

    A Primer On The Forex Market

    Moving from equities to currencies requires you to adjust how you interpret quotes, margin, spreads and rollovers.
  3. Forex Fundamentals

    What Causes A Currency Crisis?

    Find out what can cause a currency to collapse, and what central banks can do to help.
  4. Forex Education

    The Credit Crisis And The Carry Trade

    When boom times turned to bust, these trades proved devastating for traders and the broader markets.
  5. Technical Indicators

    The Basics Of Money Flow

    Learn how this indicator uses both price and volume to record a more complete picture of price action.
  6. Forex Education

    Forex: Wading Into The Currency Market

    We go over the ground rules and available resources needed for this undertaking.
  7. Forex Education

    Top 7 Questions About Currency Trading Answered

    Whether you're puzzled by pips or curious about carry trades, your queries are answered here.
  8. Forex Education

    The International Money Market

    Banks, corporations, traders and speculators all use the IMM to borrow, lend, trade, profit, finance, speculate and hedge risks.
  9. Markets

    Rising Interest Rates: Who it Helps, Who it Hurts

    When interest rates rise, the impact hits some of us differently. Here's why.
  10. Stock Analysis

    3 Stocks To Buy and Hold For the Rest of 2015

    One of the dominant themes to consider for 2015 is the normalization of monetary policy as the Fed raises interest rates.

You May Also Like

Hot Definitions
  1. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  2. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  3. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  4. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  5. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  6. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!