Question

In: Economics

1. The article states that “Uncertainty is, without a doubt, one of the biggest causes of...

1. The article states that “Uncertainty is, without a doubt, one of the biggest causes of volatility for currency." Explain why you believe this to be the case.

2. Are currency speculators really smart enough, collectively, to figure out what will happen to the value of a currency in the future? Explain.

Solutions

Expert Solution

1. "Uncertainty is, without a doubt, one of the biggest causes of volatility for currency." This statement is in common for all country, is a true statement. The flow of currency is quite unpredictable and volatile due to exchange rate uncertainty. and fluctuations. It is quite difficult to fix the current value of currency due uncertainty in exchange rate.Any economic or political reason can fluctuate the money value at a moment of time. Considering all this, currency is volatile in nature.

2. Currency speculators are actually not smart to predict the value of currency in nature rather they use the historical data and some analytical tools to predict the value if currency. Since, the prediction is based on historical data, it tends to be positive but can never be a fix prediction. Any moment of time, any economical or political phenomenon can over rule the analysis based on historical data and makes the predictions made by currency speculator a false prediction.

Rahul Sunny answered 2 years ago
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