What is currency speculation? Why is it risky? What will be an ...

[Zulu123]

What is currency speculation? Why is it risky?
 
  What will be an ideal response?

Question 2

Which of the following is a true statement about China?
 
  A) The Chinese government's shift from communism to capitalism has led to an increase in FDI.
  B) China attracts FDI because the government has eliminated elaborate bureaucracies.
  C) The Chinese government manipulates market activities for political purposes.
  D) China lacks an educated pool of employees due to slowly developing industrialization.

[jrpg123456]

Answer to Question 1

Speculation is the buying or selling of a commodity that has both an element of risk and the chance of great profit. For example, an investor could buy euros in anticipation of the euro's strengthening against other currencies. If it strengthens, the investor earns a profit; if it weakens, the investor incurs a loss. Speculators are important in the foreign-exchange market because they spot trends and try to take advantage of them. They create demand for a currency by purchasing it in the market, or they can create a supply of the currency by selling it in the market. Speculation is a very risky business. In recent years, the advent of e-trading has attracted a lot of day traders in foreign exchange. The problem is that day traders rarely make money speculating in exchange rates because forecasting currency movements is a risky business.

Answer to Question 2

C