Quotations of foreign exchange rates in the many cities of the world are identical or nearly so because of

Question

Quizplus · Accepted Answer

Foreign exchange rates in different cities of the world are almost the same due to arbitrage activities. Arbitrageurs buy and sell currencies in different markets simultaneously, taking advantage of price differences, to keep the exchange rate nearly identical in all markets. This ensures that there are no profitable arbitrage opportunities available in any particular market. Central bank control, price fixing, and clearinghouse activities may influence foreign exchange rates to some extent, but they do not necessarily ensure that rates in different cities will be identical.

Quotations of Foreign Exchange Rates in the Many Cities of the World