Speculation can be defined as an operation which involves buying and selling of equal
amounts of base currency, security or asset at two different times so as to derive profit
from favourable rate movement in the interim period. Speculation involves a deliberate
acceptance of risk since the anticipated rate movement may not materialize. Speculation
may therefore result in either profit or loss depending on the accuracy of the speculators
view or judgement. Entities who undertake such operations are called speculators. These
entities normally operate contrary to market views and therefore help to provide liquidity in
the market when critically needed.