After the plunge in the financial crisis, the Federal Reserve lowered interest rates, but additional measures were required to spur growth. In November , the central bank began the first round of its Quantitative Easing program and started purchasing mortgage-backed securities MBS.

The purchases were paused for a short period of time as economic conditions improved, but were resumed in August In the summer of , ex Federal Reserve Chairman Ben Bernanke announced policy makers are expected to begin gradually reducing Feds bond purchasing pace by the end of the year, presumably in September. On the screenshot below you can observe the sideways movement of the US dollar index as the greenback largely fluctuated based on policy makers announcements and decisions.

Thus, day traders should closely follow all announcements by central bankers, especially the ones with vote on FOMC meetings, in order to capitalize on the currency fluctuations. Substantial volatility is usually observed during speeches of the Federal Reserve Chairman, as well as before, during and after the Federal Open Market Committee meetings and the later release of the Federal Reserve Minutes.

Skip to content. Using Carry Trades to Maximize Profit ». Positioning according to central banks interventions This lesson will cover the following Why are central bank interventions important Central bank meetings Speculative fading Examples of major interventions. Lot Size.

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Nigeria's central bank said on Friday it will raise the foreign exchange net open position limit banks can hold to 3 pct from 1 pct of shareholders' funds, less than two weeks after slashing limits to help protect the local naira currency. The net open position is the ratio of dollars banks can hold relative to shareholders' funds.

The central bank slashed net open positions to 1 percent from 5 percent on Oct. Source: Reuters Reporting by Oludare Mayowa. Nigeria Central Bank raises forex net open position limits. Friday October 21, pm Nigeria's central bank said on Friday it will raise the foreign exchange net open position limit banks can hold to 3 pct from 1 pct of shareholders' funds, less than two weeks after slashing limits to help protect the local naira currency.

Unilever Nigeria Plc declares N4. Courteville Investment Plc declares N Latest News. April 02, You would be the first to know the latest happenings around the Financial Market on Register. CBN Communique No. All News. All One Min News.

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Budget and Plans. Since the introduction of the Pillar 1 capital charge for market risk, banks must hold capital for Foreign Exchange FX risk, irrespective of whether the open FX position was held on the trading or the banking book. An exception was made for Structural Foreign Exchange Positions, where supervisory authorities were free to allow banks to maintain an open FX position to protect their capital adequacy ratio in this way. This exemption has been applied in a diverse way by supervisors and therefore, the treatment of Structural FX risk has been updated in recent regulatory publications.

In this article we discuss these publications and market practice around Structural FX risk based on an analysis of the policies applied by the top 25 banks in Europe. Based on the amendment to the Capital Accord, banks that apply for the exemption of Structural FX positions can exclude these positions from the Pillar 1 capital requirement for market risk.

This exemption was introduced to allow international banks with subsidiaries in currencies different from the reporting currency to employ a strategy to hedge the capital ratio from adverse movements in the FX rate.

In principle a bank can apply one of two strategies in managing its FX risk. As can also be seen in the exhibit below, the FX scenario that has an adverse impact on the bank differs between both strategies. In strategy 1, an appreciation of the currency will result in a decrease of the capital ratio, while in the second strategy the value of the equity will increase if the currency appreciates.

Limits to Foreign Exchange Net Open Positions and Capital Requirements in Emerging Economies

The scenario with an adverse impact on the bank in strategy 2 is when the foreign currency depreciates. Until now, only limited guidance has been available on e. As a result, the practical implementation of the Structural FX exemption varies significantly across banks.

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Recent regulatory publications aim to enhance regulatory guidance to ensure a more standardized application of the exemption. The conditions from the amendment were complemented to a total of seven conditions related to the policy framework required for FX risk and the maximum and type of exposure that can be in scope of the exemption.

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Within Europe, this exemption is covered in the Capital Requirements Regulation under article 2.