Question

Why are there restrictions on speculation in foreign exchange market?

Answer 1

Hedgers reduce their risk by taking an opposite position in the market to what they are trying to hedge. The ideal situation in hedging would be to cause one effect to cancel out another. ... As you can see, although hedgers are protected from any losses, they are also restricted from any gains.

Answer 2

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▶Countries with weak and/or developing economies generally use foreign exchange controls to limit speculation against their currencies. They are often accompanied by capital controls that limit the amount of foreign investment in the country.