lian economy or pessimistic predictions as to its performance increase the perceived risk of investing here while optimism regarding the future direction of economic activity in Australia raises the expectations of overseas investors. These will lead to either a depreciation, or an appreciation in currency. Speculation on foreign exchange markets occurs when currencies are bought and sold for the sole purpose of making a profit. Most speculation is based on expectations regarding the relative movements of exchange rates. Speculators base their forecasts on anything that affects the value of currencies - the performance of the current account, the signing of trade agreements, government economic policy decisions, political events, rumours, wars, and so on....
