Conduct foreign exchange transactions

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International firms need to conduct foreign exchange transactions to conduct business internationally. Changes in exchange rates also affect their profits, so it is prudent for them to seek FX contracts to maximize their return rather than simply relying on the spot market. However speculation just seeks to maximize the return from actual changes in exchange rates themselves, rather than a underlying international business transaction (i.e. imports and exports). Large speculators have done tremendous damage to local currencies and thus the local economy that currency is used in. Should speculation in foreign currencies be allowed? Does it make any benefit to the world economy?

Reference no: EM132504733

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