Currency Arbitrage- A currency arbitrage is a forex strategy in which a currency trader takes advantage of different spreads offered by brokers for a particular currency pair by making trades. Different spreads for a currency pair imply disparities between the bid and ask prices. Currency arbitrage is a strategy in foreign exchange where a currency trader takes advantage of different spreads for a particular currency pair. This is an investment strategy that involves buying a currency on one market and instantly selling it on another market.
Currency arbitrage takes advantage of temporary discrepancies in price between two markets. Currency markets are very liquid, opportunities for currency arbitrage are few and generally last only for a few seconds. Conducting it requires sophisticated online systems.
In today’s global economy, a multinational company has to deal with the currencies of the various countries it operates in. Currency arbitrage, or simultaneous purchase and sale of currencies in different markets, offers opportunities for advantageous movement of money from one currency to another.
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