LIMA, Dec 10 (Reuters) - Peru’s banking regulator further restricted the ability of banks to make big bets in the currency market on Monday in the government’s latest move to blunt the sol’s gains to a 16-year-high.
Under the new rule, which Peru’s SBS banking regulator had circulated for a hearing period in October, banks’ positions in derivatives will be limited to 20 percent of their assets as defined by regulators or 300 million soles ($116 million).
The previous limit had allowed banks a ceiling of 25 percent of their assets or 500 million soles.
The SBS also trimmed the net short position that banks can take in the currency market to 10 percent of assets and banks’ net long position to 50 percent of assets.
“As a measure of prudential macro regulation, it’s necessary to change limits on short and long positions in foreign currencies, and net derivative positions,” the regulator said in Peru’s official gazette.
The sol has appreciated this year as the U.S. dollar slumps globally and the Federal Reserve keeps monetary policy exceptionally loose.
Because Peru’s sol is not fully convertible, some of the pressure on it has come from derivatives, especially the growing market for non-deliverable forwards, or NDFs.
Traders have said limits on positions in the forwards market, along with the central bank’s frequent interventions in the spot market and increases in bank deposit requirements, have had a limited impact on the sol.
It ended at a bit stronger on Monday at 2.571 per U.S. dollar - a new high.
The central bank bought $60 million in the spot market on Monday, adding to the record $13 billion it has bought so far this year.