More often, speculation forces currencies through arbitrage into a closer alignment with underlying market values to the benefit of the international economic and financial system as a whole. We used to describe capital flight as “hot money”. But we soon recognized that it was not the money that was “hot”, but the place it was running from.
The prodigious expansion of cross-border financial transactions in recent years has tightened and refined the arbitrage process significantly. But, to repeat, the inestimable advantages that it brings to trade and standards of living also carry a price.