LIMA, Feb 15 (Reuters) – Peru has adopted a rule to limit the positions that banks and pension funds can hold in foreign currencies in a bid to help cut long-term volatility.
The decision, which caps institutions’ foreign currency holdings at 75 percent of their assets from the current ceiling of 100 percent, was published over the weekend in the Peruvian government’s official gazette.
Banks and pension funds will have 90 days to make sure their positions do not exceed the new rule, which also sets institutions’ sales of foreign currencies at 15 percent of total assets.
When the rule was first discussed last October, an official at the central bank told Reuters the long positions of banks in dollars at that time were around 40 percent, suggesting the rule might not cause any rapid changes in the level of Peru’s currency and is mainly aimed at reducing long-term volatility.
“What the banking and insurance regulator and the government is trying to do is make sure traders don’t take advantage of the situation to speculate and exacerbate existing pressures on the sol,” said Roberto Flores, an analyst at brokerage Inteligo SAB in Lima.