When can trading by speculators have an adverse impact on the exchange rate? a

Finance Aug 28, 2020

When can trading by speculators have an adverse impact on the exchange rate?

a.When speculators are uninformed.

b.When speculators buy a currency when it is low and sell a currency when it is high.

c.When speculators are risk neutral.

d.When speculators buy a currency when it is high and sell a currency when it is low

Expert Solution

The correct answer is Option A

The Trading by speculators may have adverse impact on exchange rate when the speculators are uninformed about the news and policies, which can create Demand and supply imbalance resulting in adverse results.

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