Speculative trading in foreign exchange by our residents. What does this mean/

Hey Aarti,

Speculation is the process of buying and selling a (say) commodity with the element of risk for the purpose of earning profits. For example, speculative trading in the foreign exchange market implies buying and selling of foreign currency with a view to fetch income or gain. If an Indian investor expects an increase in US dollar with respect to Indian rupee, then he wishes to hold dollars that means he will demand more dollars at a currently lower price (he is expecting that the future price of dollar is greater then the current price).If his expectation turns out to be true, then he will make profits by selling US dollar at higher price in the future, else incurs heavy loss.

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