The FI is acting as a speculator when it
A)buys or sells currency to balance the FI's net exposure.
B)takes a nonzero net position in a particular currency.
C)processes an exporter's transaction in a foreign currency.
D)makes a market in a currency.

Question

Quizplus · Accepted Answer

When an FI takes a nonzero net position in a particular currency, it is essentially speculating on the future direction of that currency's value. The other options involve actions that may be taken by an FI, but they do not necessarily indicate speculation. Buying or selling currency to balance a net exposure is simply risk management, processing an exporter's transaction is providing a service, and making a market in a currency can be done for various reasons, such as facilitating client transactions.

The FI Is Acting as a Speculator When It