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.
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.
Investment dictionary. Academic. 2012.
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