Foreign exchange market
The foreign exchange market (currency, forex, or FX)
is where currency trading takes place. It is where banks and other official
institutions facilitate the buying and selling of foreign currencies. [1]FX
transactions typically involve one party purchasing a quantity of one currency
in exchange for paying a quantity of another. The foreign exchange market that
we see today started evolving during the 1970s when worldover countries
gradually switched to floating exchange rate from their erstwhile exchange rate
regime, which remained fixed as per the Bretton Woods system until 1971.
Presently, the FX market is one of the largest and most liquid financial markets
in the world, and includes trading between large banks, central banks, currency
speculators, corporations, governments, and other financial institutions. The
average daily volume in the global foreign exchange and related markets is
continuously growing. Traditional daily turnover was reported to be over US$3.2
trillion in April 2007 by the Bank for International Settlements.[2] Since then,
the market has continued to grow. According to Euromoney's annual FX Poll,
volumes grew a further 41% between 2007 and 2008.[3]
The purpose of FX market is to facilitate trade and investment. The need for a
foreign exchange market arises because of the presence of multifarious
international currencies such as US Dollars, Euros, Japanese yen, Pounds
Sterling, etc., and the need for trading in such currencies
Market size and liquidity
The foreign exchange market is unique because of
its trading volumes,
the extreme liquidity of the market,
its geographical dispersion,
its long trading hours: 24 hours a day except on weekends (from 22:00 UTC on
Sunday until 22:00 UTC Friday),
the variety of factors that affect exchange rates.
the low margins of profit compared with other markets of fixed income (but
profits can be high due to very large trading volumes)
the use of leverage
Main foreign exchange market turnover, 1988 - 2007, measured in billions of
USD.As such, it has been referred to as the market closest to the ideal perfect
competition, notwithstanding market manipulation by central banks. According to
the Bank for International Settlements,[2] average daily turnover in global
foreign exchange markets is estimated at $3.98 trillion. Trading in the world's
main financial markets accounted for $3.21 trillion of this. This approximately
$3.21 trillion in main foreign exchange market turnover was broken down as
follows:
$1.005 trillion in spot transactions
$362 billion in outright forwards
$1.714 trillion in foreign exchange swaps
$129 billion estimated gaps in reporting
Of the $3.98 trillion daily global turnover, trading in London accounted for
around $1.36 trillion, or 34.1% of the total, making London by far the global
center for foreign exchange. In second and third places respectively, trading in
New York accounted for 16.6%, and Tokyo accounted for 6.0%.[4] In addition to
"traditional" turnover, $2.1 trillion was traded in derivatives.
Exchange-traded FX futures contracts were introduced in 1972 at the Chicago
Mercantile Exchange and are actively traded relative to most other futures
contracts.
Several other developed countries also permit the trading of FX derivative
products (like currency futures and options on currency futures) on their
exchanges. All these developed countries already have fully convertible capital
accounts. Most emerging countries do not permit FX derivative products on their
exchanges in view of prevalent controls on the capital accounts. However, a few
select emerging countries (e.g., Korea, South Africa, India—[1]; [2]) have
already successfully experimented with the currency futures exchanges, despite
having some controls on the capital account.
FX futures volume has grown rapidly in recent years, and accounts for about 7%
of the total foreign exchange market volume, according to The Wall Street
Journal Europe (5/5/06, p. 20).
Foreign exchange trading increased by 38% between April 2005 and April 2006 and
has more than doubled since 2001. This is largely due to the growing importance
of foreign exchange as an asset class and an increase in fund management assets,
particularly of hedge funds and pension funds. The diverse selection of
execution venues have made it easier for retail traders to trade in the foreign
exchange market. In 2006, retail traders constituted over 2% of the whole FX
market volumes with an average daily trade volume of over US$50-60 billion (see
retail trading platforms).[6] Because foreign exchange is an OTC market where
brokers/dealers negotiate directly with one another, there is no central
exchange or clearing house. The biggest geographic trading centre is the UK,
primarily London, which according to IFSL estimates has increased its share of
global turnover in traditional transactions from 31.3% in April 2004 to 34.1% in
April 2007. The ten most active traders account for almost 80% of trading
volume, according to the 2008 Euromoney FX survey.[3] These large international
banks continually provide the market with both bid (buy) and ask (sell) prices.
The bid/ask spread is the difference between the price at which a bank or market
maker will sell ("ask", or "offer") and the price at which a market-maker will
buy ("bid") from a wholesale customer. This spread is minimal for actively
traded pairs of currencies, usually 0–3 pips. For example, the bid/ask quote of
EUR/USD might be 1.2200/1.2203 on a retail broker. Minimum trading size for most
deals is usually 100,000 units of base currency, which is a standard "lot".
These spreads might not apply to retail customers at banks, which will routinely
mark up the difference to say 1.2100/1.2300 for transfers, or say 1.2000/1.2400
for banknotes or travelers' checks. Spot prices at market makers vary, but on
EUR/USD are usually no more than 3 pips wide (i.e., 0.0003). Competition is
greatly increased with larger transactions, and pip spreads shrink on the major
pairs to as little as 1 to 2 pips
Market participants
Financial markets
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v • d • e
Unlike a stock market, where all participants have access to the same prices,
the foreign exchange market is divided into levels of access. At the top is the
inter-bank market, which is made up of the largest investment banking firms.
Within the inter-bank market, spreads, which are the difference between the bid
and ask prices, are razor sharp and usually unavailable, and not known to
players outside the inner circle. The difference between the bid and ask prices
widens (from 0-1 pip to 1-2 pips for some currencies such as the EUR). This is
due to volume. If a trader can guarantee large numbers of transactions for large
amounts, they can demand a smaller difference between the bid and ask price,
which is referred to as a better spread. The levels of access that make up the
foreign exchange market are determined by the size of the "line" (the amount of
money with which they are trading). The top-tier inter-bank market accounts for
53% of all transactions. After that there are usually smaller investment banks,
followed by large multi-national corporations (which need to hedge risk and pay
employees in different countries), large hedge funds, and even some of the
retail FX-metal market makers. According to Galati and Melvin, “Pension funds,
insurance companies, mutual funds, and other institutional investors have played
an increasingly important role in financial markets in general, and in FX
markets in particular, since the early 2000s.” (2004) In addition, he notes,
“Hedge funds have grown markedly over the 2001–2004 period in terms of both
number and overall size” Central banks also participate in the foreign exchange
market to align currencies to their economic needs.
gaza Banks
The interbank market caters for both the majority of commercial turnover and
large amounts of speculative trading every day. A large bank may trade billions
of dollars daily. Some of this trading is undertaken on behalf of customers, but
much is conducted by proprietary desks, trading for the bank's own account.
Until recently, foreign exchange brokers did large amounts of business,
facilitating interbank trading and matching anonymous counterparts for small
fees. Today, however, much of this business has moved on to more efficient
electronic systems. The broker squawk box lets traders listen in on ongoing
interbank trading and is heard in most trading rooms, but turnover is noticeably
smaller than just a few years ago.
gaza Commercial companies
An important part of this market comes from the financial activities of
companies seeking foreign exchange to pay for goods or services. Commercial
companies often trade fairly small amounts compared to those of banks or
speculators, and their trades often have little short term impact on market
rates. Nevertheless, trade flows are an important factor in the long-term
direction of a currency's exchange rate. Some multinational companies can have
an unpredictable impact when very large positions are covered due to exposures
that are not widely known by other market participants.
gaza Central banks
National central banks play an important role in the foreign exchange markets.
They try to control the money supply, inflation, and/or interest rates and often
have official or unofficial target rates for their currencies. They can use
their often substantial foreign exchange reserves to stabilize the market.
Milton Friedman argued that the best stabilization strategy would be for central
banks to buy when the exchange rate is too low, and to sell when the rate is too
high—that is, to trade for a profit based on their more precise information.
Nevertheless, the effectiveness of central bank "stabilizing speculation" is
doubtful because central banks do not go bankrupt if they make large losses,
like other traders would, and there is no convincing evidence that they do make
a profit trading.
The mere expectation or rumor of central bank intervention might be enough to
stabilize a currency, but aggressive intervention might be used several times
each year in countries with a dirty float currency regime. Central banks do not
always achieve their objectives. The combined resources of the market can easily
overwhelm any central bank.[7] Several scenarios of this nature were seen in the
1992–93 ERM collapse, and in more recent times in Southeast Asia.
gaza Hedge funds as speculators
About 70% to 90% of the foreign exchange transactions are speculative. In other
words, the person or institution that bought or sold the currency has no plan to
actually take delivery of the currency in the end; rather, they were solely
speculating on the movement of that particular currency. Hedge funds have gained
a reputation for aggressive currency speculation since 1996. They control
billions of dollars of equity and may borrow billions more, and thus may
overwhelm intervention by central banks to support almost any currency, if the
economic fundamentals are in the hedge funds' favor.
gaza Investment management firms
Investment management firms (who typically manage large accounts on behalf of
customers such as pension funds and endowments) use the foreign exchange market
to facilitate transactions in foreign securities. For example, an investment
manager bearing an international equity portfolio needs to purchase and sell
several pairs of foreign currencies to pay for foreign securities purchases.
Some investment management firms also have more speculative specialist currency
overlay operations, which manage clients' currency exposures with the aim of
generating profits as well as limiting risk. Whilst the number of this type of
specialist firms is quite small, many have a large value of assets under
management (AUM), and hence can generate large trades.
gaza Retail foreign exchange brokers
There are two types of retail brokers offering the opportunity for speculative
trading: retail foreign exchange brokers and market makers. Retail traders
(individuals) are a small fraction of this market and may only participate
indirectly through brokers or banks. Retail brokers, while largely controlled
and regulated by the CFTC and NFA might be subject to foreign exchange
scams.[8][9] At present, the NFA and CFTC are imposing stricter requirements,
particularly in relation to the amount of Net Capitalization required of its
members. As a result many of the smaller, and perhaps questionable brokers are
now gone. It is not widely understood that retail brokers and market makers
typically trade against their clients and frequently take the other side of
their trades. This can often create a potential conflict of interest and give
rise to some of the unpleasant experiences some traders have had. A move toward
NDD (No Dealing Desk) and STP (Straight Through Processing) has helped to
resolve some of these concerns and restore trader confidence, but caution is
still advised in ensuring that all is as it is presented.
gaza Non-bank Foreign Exchange Companies
Non-bank foreign exchange companies offer currency exchange and international
payments to private individuals and companies. These are also known as foreign
exchange brokers but are distinct in that they do not offer speculative trading
but currency exchange with payments. I.e., there is usually a physical delivery
of currency to a bank account.
It is estimated that in the UK, 14% of currency transfers/payments[10] are made
via Foreign Exchange Companies.[11] These companies' selling point is usually
that they will offer better exchange rates or cheaper payments than the
customer's bank. These companies differ from Money Transfer/Remittance Companies
in that they generally offer higher-value services.
gaza Money Transfer/Remittance Companies
Money transfer companies/remittance companies perform high-volume low-value
transfers generally by economic migrants back to their home country. In 2007,
the Aite Group estimated that there were $369 billion of remittances (an
increase of 8% on the previous year). The four largest markets (India, China,
Mexico and the Philippines) receive $95 billion. The largest and best known
provider is Western Union with 345,000 agents globally.
gaza Trading characteristics
Most traded currencies[2]
Currency distribution of reported FX market turnover Rank Currency ISO 4217 code
(Symbol) % daily share
(April 2007)
1 United States dollar USD ($) 86.3%
2 Euro EUR (€) 37.0%
3 Japanese yen JPY (¥) 17.0%
4 Pound sterling GBP (£) 15.0%
5 Swiss franc CHF (Fr) 6.8%
6 Australian dollar AUD ($) 6.7%
7 Canadian dollar CAD ($) 4.2%
8-9 Swedish krona SEK (kr) 2.8%
8-9 Hong Kong dollar HKD ($) 2.8%
10 Norwegian krone NOK (kr) 2.2%
11 New Zealand dollar NZD ($) 1.9%
12 Mexican peso MXN ($) 1.3%
13 Singapore dollar SGD ($) 1.2%
14 South Korean won KRW (₩) 1.1%
Other 14.5%
Total 200%
There is no unified or centrally cleared market for the majority of FX trades,
and there is very little cross-border regulation. Due to the over-the-counter
(OTC) nature of currency markets, there are rather a number of interconnected
marketplaces, where different currencies instruments are traded. This implies
that there is not a single exchange rate but rather a number of different rates
(prices), depending on what bank or market maker is trading, and where it is. In
practice the rates are often very close, otherwise they could be exploited by
arbitrageurs instantaneously. Due to London's dominance in the market, a
particular currency's quoted price is usually the London market price. A joint
venture of the Chicago Mercantile Exchange and Reuters, called Fxmarketspace
opened in 2007 and aspired but failed to the role of a central market clearing
mechanism.
The main trading center is London, but New York, Tokyo, Hong Kong and Singapore
are all important centers as well. Banks throughout the world participate.
Currency trading happens continuously throughout the day; as the Asian trading
session ends, the European session begins, followed by the North American
session and then back to the Asian session, excluding weekends.
Fluctuations in exchange rates are usually caused by actual monetary flows as
well as by expectations of changes in monetary flows caused by changes in gross
domestic product (GDP) growth, inflation (purchasing power parity theory),
interest rates (interest rate parity, Domestic Fisher effect, International
Fisher effect), budget and trade deficits or surpluses, large cross-border M&A
deals and other macroeconomic conditions. Major news is released publicly, often
on scheduled dates, so many people have access to the same news at the same
time. However, the large banks have an important advantage; they can see their
customers' order flow.
Currencies are traded against one another. Each pair of currencies thus
constitutes an individual product and is traditionally noted XXX/YYY, where YYY
is the ISO 4217 international three-letter code of the currency into which the
price of one unit of XXX is expressed (called base currency). For instance,
EUR/USD is the price of the euro expressed in US dollars, as in 1 euro = 1.5465
dollar. Out of convention, the first currency in the pair, the base currency,
was the stronger currency at the creation of the pair. The second currency,
counter currency, was the weaker currency at the creation of the pair.
The factors affecting XXX will affect both XXX/YYY and XXX/ZZZ. This causes
positive currency correlation between XXX/YYY and XXX/ZZZ.
On the spot market, according to the BIS study, the most heavily traded products
were:
EUR/USD: 27%
USD/JPY: 13%
GBP/USD (also called sterling or cable): 12%
and the US currency was involved in 86.3% of transactions, followed by the euro
(37.0%), the yen (17.0%), and sterling (15.0%) (see table). Note that volume
percentages should add up to 200%: 100% for all the sellers and 100% for all the
buyers.
Trading in the euro has grown considerably since the currency's creation in
January 1999, and how long the foreign exchange market will remain
dollar-centered is open to debate. Until recently, trading the euro versus a
non-European currency ZZZ would have usually involved two trades: EUR/USD and
USD/ZZZ. The exception to this is EUR/JPY, which is an established traded
currency pair in the interbank spot market. As the dollar's value has eroded
during 2008, interest in using the euro as reference currency for prices in
commodities (such as oil), as well as a larger component of foreign reserves by
banks, has increased dramatically. Transactions in the currencies of
commodity-producing countries, such as AUD, NZD, CAD, have also increased.
gaza Determinants of FX Rates
See also: exchange rates
The following theories explain the fluctuations in FX rates in a floating
exchange rate regime (In a fixed exchange rate regime, FX rates are decided by
its government):
(a) International parity conditions viz; purchasing power parity, interest rate
parity, Domestic Fisher effect, International Fisher effect. Though to some
extent the above theories provide logical explanation for the fluctuations in
exchange rates, yet these theories falter as they are based on challengeable
assumptions [e.g., free flow of goods, services and capital] which seldom hold
true in the real world.
(b) Balance of payments model (see exchange rate). This model, however, focuses
largely on tradable goods and services, ignoring the increasing role of global
capital flows. It failed to provide any explanation for continuous appreciation
of dollar during 1980s and most part of 1990s in face of soaring US current
account deficit.
(c) Asset market model (see exchange rate) views currencies as an important
asset class for constructing investment portfolios. Assets prices are influenced
mostly by people’s willingness to hold the existing quantities of assets, which
in turn depends on their expectations on the future worth of these assets. The
asset market model of exchange rate determination states that “the exchange rate
between two currencies represents the price that just balances the relative
supplies of, and demand for, assets denominated in those currencies.”
None of the models developed so far succeed to explain FX rates levels and
volatility in the longer time frames. For shorter time frames (less than a few
days) algorithm can be devised to predict prices. Large and small institutions
and professional individual traders have made consistent profits from it. It is
understood from above models that many macroeconomic factors affect the exchange
rates and in the end currency prices are a result of dual forces of demand and
supply. The world's currency markets can be viewed as a huge melting pot: in a
large and ever-changing mix of current events, supply and demand factors are
constantly shifting, and the price of one currency in relation to another shifts
accordingly. No other market encompasses (and distills) as much of what is going
on in the world at any given time as foreign exchange.
Supply and demand for any given currency, and thus its value, are not influenced
by any single element, but rather by several. These elements generally fall into
three categories: economic factors, political conditions and market psychology.
gaza Economic factors
These include: (a)economic policy, disseminated by government agencies and
central banks, (b)economic conditions, generally revealed through economic
reports, and other economic indicators.
Economic policy comprises government fiscal policy (budget/spending practices)
and monetary policy (the means by which a government's central bank influences
the supply and "cost" of money, which is reflected by the level of interest
rates).
Economic conditions include:
Government budget deficits or surpluses
The market usually reacts negatively to widening government budget deficits, and
positively to narrowing budget deficits. The impact is reflected in the value of
a country's currency.
Balance of trade levels and trends
The trade flow between countries illustrates the demand for goods and services,
which in turn indicates demand for a country's currency to conduct trade.
Surpluses and deficits in trade of goods and services reflect the
competitiveness of a nation's economy. For example, trade deficits may have a
negative impact on a nation's currency.
Inflation levels and trends
Typically a currency will lose value if there is a high level of inflation in
the country or if inflation levels are perceived to be rising [. This is because
inflation erodes purchasing power, thus demand, for that particular currency.
However, a currency may sometimes strengthen when inflation rises because of
expectations that the central bank will raise short-term interest rates to
combat rising inflation.
Economic growth and health
Reports such as GDP, employment levels, retail sales, capacity utilization and
others, detail the levels of a country's economic growth and health. Generally,
the more healthy and robust a country's economy, the better its currency will
perform, and the more demand for it there will be.
Productivity of an economy
Increasing productivity in an economy should positively influence the value of
its currency. It affects are more prominent if the increase is in the traded
sector [3].
gaza Political conditions
Internal, regional, and international political conditions and events can have a
profound effect on currency markets.
All exchange rates are susceptible to political instability and anticipations
about the new ruling party. Political upheaval and instability can have a
negative impact on a nation's economy. For example, destabilization of coalition
governments in India, Pakistan and Thailand can negatively affect the value of
their currencies. Similarly, in a country experiencing financial difficulties,
the rise of a political faction that is perceived to be fiscally responsible can
have the opposite effect. Also, events in one country in a region may spur
positive or negative interest in a neighboring country and, in the process,
affect its currency.
gaza Market psychology
Market psychology and trader perceptions influence the foreign exchange market
in a variety of ways:
Flights to quality
Unsettling international events can lead to a "flight to quality," with
investors seeking a "safe haven". There will be a greater demand, thus a higher
price, for currencies perceived as stronger over their relatively weaker
counterparts. The Swiss franc has been a traditional safe haven during times of
political or economic uncertainty.[12]
Long-term trends
Currency markets often move in visible long-term trends. Although currencies do
not have an annual growing season like physical commodities, business cycles do
make themselves felt. Cycle analysis looks at longer-term price trends that may
rise from economic or political trends. [13]
"Buy the rumor, sell the fact"
This market truism can apply to many currency situations. It is the tendency for
the price of a currency to reflect the impact of a particular action before it
occurs and, when the anticipated event comes to pass, react in exactly the
opposite direction. This may also be referred to as a market being "oversold" or
"overbought".[14] To buy the rumor or sell the fact can also be an example of
the cognitive bias known as anchoring, when investors focus too much on the
relevance of outside events to currency prices.
Economic numbers
While economic numbers can certainly reflect economic policy, some reports and
numbers take on a talisman-like effect: the number itself becomes important to
market psychology and may have an immediate impact on short-term market moves.
"What to watch" can change over time. In recent years, for example, money
supply, employment, trade balance figures and inflation numbers have all taken
turns in the spotlight.
Technical trading considerations
As in other markets, the accumulated price movements in a currency pair such as
EUR/USD can form apparent patterns that traders may attempt to use. Many traders
study price charts in order to identify such patterns.[15]
gaza Algorithmic trading in foreign exchange
Electronic trading is growing in the FX market, and algorithmic trading is
becoming much more common. According to financial consultancy Celent estimates,
by 2008 up to 25% of all trades by volume will be executed using algorithm, up
from about 18% in 2005.[citation needed]
An algorithmic trader needs to be mindful of potential fraud by the broker. Part
of the weekly algorithm should include a check to see if the amount of
transaction errors when the trader is losing money occurs in the same proportion
as when the trader would have made money.
gaza Financial instruments
gaza Spot
A spot transaction is a two-day delivery transaction (except in the case of
trades between the US Dollar, Canadian Dollar, Turkish Lira and Russian Ruble,
which settle the next business day), as opposed to the futures contracts, which
are usually three months. This trade represents a “direct exchange” between two
currencies, has the shortest time frame, involves cash rather than a contract;
and interest is not included in the agreed-upon transaction. The data for this
study come from the spot market. Spot transactions has the second largest
turnover by volume after Swap transactions among all FX transactions in the
Global FX market. NNM
gaza Forward
See also: forward contract
One way to deal with the foreign exchange risk is to engage in a forward
transaction. In this transaction, money does not actually change hands until
some agreed upon future date. A buyer and seller agree on an exchange rate for
any date in the future, and the transaction occurs on that date, regardless of
what the market rates are then. The duration of the trade can be a one day, a
few days, months or years. Usually the date is decided by both parties.
gaza Future
Main article: currency future
Foreign currency futures are exchange traded forward transactions with standard
contract sizes and maturity dates — for example, $1000 for next November at an
agreed rate [4],[5]. Futures are standardized and are usually traded on an
exchange created for this purpose. The average contract length is roughly 3
months. Futures contracts are usually inclusive of any interest amounts.
gaza Swap
Main article: foreign exchange swap
The most common type of forward transaction is the currency swap. In a swap, two
parties exchange currencies for a certain length of time and agree to reverse
the transaction at a later date. These are not standardized contracts and are
not traded through an exchange.
gaza Option
Main article: foreign exchange option
A foreign exchange option (commonly shortened to just FX option) is a derivative
where the owner has the right but not the obligation to exchange money
denominated in one currency into another currency at a pre-agreed exchange rate
on a specified date. The FX options market is the deepest, largest and most
liquid market for options of any kind in the world.
gaza Exchange-Traded Fund
Main article: exchange-traded fund
Exchange-traded funds (or ETFs) are open ended investment companies that can be
traded at any time throughout the course of the day. Typically, ETFs try to
replicate a stock market index such as the S&P 500 (e.g., SPY), but recently
they are now replicating investments in the currency markets with the ETF
increasing in value when the US Dollar weakens versus a specific currency, such
as the Euro. Certain of these funds track the price movements of world
currencies versus the US Dollar, and increase in value directly counter to the
US Dollar, allowing for speculation in the US Dollar for US and US Dollar
denominated investors and speculators.
gaza Speculation
Controversy about currency speculators and their effect on currency devaluations
and national economies recurs regularly. Nevertheless, economists including
Milton Friedman have argued that speculators ultimately are a stabilizing
influence on the market and perform the important function of providing a market
for hedgers and transferring risk from those people who don't wish to bear it,
to those who do.[16] Other economists such as Joseph Stiglitz consider this
argument to be based more on politics and a free market philosophy than on
economics.[17]
Large hedge funds and other well capitalized "position traders" are the main
professional speculators. According to some economists, individual traders could
act as "noise traders" and have a more destabilizing role than larger and better
informed actors [18].
Currency speculation is considered a highly suspect activity in many
countries.[where?] While investment in traditional financial instruments like
bonds or stocks often is considered to contribute positively to economic growth
by providing capital, currency speculation does not; according to this view, it
is simply gambling that often interferes with economic policy. For example, in
1992, currency speculation forced the Central Bank of Sweden to raise interest
rates for a few days to 500% per annum, and later to devalue the krona.[19]
Former Malaysian Prime Minister Mahathir Mohamad is one well known proponent of
this view. He blamed the devaluation of the Malaysian ringgit in 1997 on George
Soros and other speculators.
Gregory J. Millman reports on an opposing view, comparing speculators to
"vigilantes" who simply help "enforce" international agreements and anticipate
the effects of basic economic "laws" in order to profit.[20]
In this view, countries may develop unsustainable financial bubbles or otherwise
mishandle their national economies, and foreign exchange speculators allegedly
made the inevitable collapse happen sooner. A relatively quick collapse might
even be preferable to continued economic mishandling. Mahathir Mohamad and other
critics of speculation are viewed as trying to deflect the blame from themselves
for having caused the unsustainable economic conditions. Given that Malaysia
recovered quickly after imposing currency controls directly against IMF advice,
this view is open to doubt.
References
http://en.wikipedia.org/wiki/Foreign_exchange_market