How Do Speculators and Arbitragers Affect the Foreign Exchange Market

question 17

Essay

How do speculators and arbitragers affect the foreign exchange market? Briefly describe the different ways that arbitragers can "cover" themselves in the foreign exchange market. Finally, will speculation in foreign exchange always have a stabilizing effect on the foreign exchange market? Why or why not?

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Definitions:

Territory

An area of land under the jurisdiction of a ruler or state, often denoting non-state regions with a degree of autonomy.

State

A political entity with a defined territory, government, and the capacity to enter into relations with other states.

Northwest Territory

Territory established by the Northwest Ordinance of 1787, covering what would become the states of Ohio, Indiana, Illinois, Michigan, Wisconsin, and part of Minnesota.

Slavery

Slavery is a system in which individuals are owned by others, deprived of personal freedom, and forced to perform labor or services.