Currency speculation is the activity where one buys a foreign currency, not because he/she needs to pay for an import or is investing in a foreign business, but because he/she hopes to sell the currency at a higher rate in the future (in technical language the currency “appreciates”). The purpose here is to buy at low price and sell at high price. The distinguishing feature of currency speculation is that the buyer or seller is involved in the activity not because he has the currency or needs the currency, but to takes advantage of exchange rate movements.
Currency speculation can be done through different modes- currency forwards, currency futures, currency swaps etc.
