The actions taken by arbitrageurs in the foreign exchange markets

Question

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Arbitrageurs help assure that exchange rates are equalized across all markets by taking advantage of price discrepancies between different markets. They buy low in one market and sell high in another, which helps to bring exchange rates in line with their true values. This process actually helps to stabilize foreign exchange markets by reducing price discrepancies and increasing market efficiency. While there may be risk involved in trading, the actions of arbitrageurs are not inherently risky or destabilizing. Additionally, while there may be some overlap between the activities of arbitrageurs and speculators, the two groups are not identical.

The Actions Taken by Arbitrageurs in the Foreign Exchange Markets