Colombia Curbs FX Trades By Pension Funds

Colombia is seeking to restrict foreign exchange trades by large local pension funds.

Colombia is seeking to restrict foreign exchange (FX) trades by large local pension funds, The Wall Street Journal reports. The measure is aimed at controlling short-term volatility in the exchange rate by stopping causative activities. A pension fund will be allowed FX operations for five business days only for a maximum of 2.5 percent of the fund’s value.

The FX transactions of pension funds have been capped at $1.3 billion over the five-day period, as the total value of the pension funds is $52 billion. The Colombian government is trying to keep the peso stable at its existing levels. The peso experienced a fall in September on worries of a sovereign debt crisis in Europe and recession in the U.S. The recent decision may limit liquidity and in turn contain volatility.

Click here for the story from The Wall Street Journal.

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