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:

Excretory Organs

Organs involved in the process of removing waste products and excess substances from an organism's body, such as kidneys in humans.

Choanoflagellate

A group of free-living unicellular and colonial flagellate eukaryotes considered to be the closest living relatives of the animals.

Protist

Common term for a eukaryote that is not a plant, animal, or fungus.

Dinoflagellate

A group of single-celled, mostly marine organisms with two flagella, known for causing bioluminescence and red tides.