First of all, when a country has a temporary deficit in its balance of payments, its currency exchange rate will temporarily fall. Speculators predict that this exchange rate decline is temporary and will soon pick up, so they buy the country's currency at a lower exchange rate (referring to the country's capital inflow) and sell it at a higher exchange rate (referring to the capital output) after the exchange rate rises; On the contrary, if a country has a temporary surplus in its balance of payments and its currency exchange rate rises temporarily, then speculators will sell its currency at a higher exchange rate (which means the country's capital outflow) and buy it at a lower exchange rate (that is, capital inflow) after the exchange rate falls. This speculative capital flow can narrow the fluctuation range of exchange rate and finally stabilize the exchange rate.
Second, when a country's balance of payments shows a sustained surplus, its currency exchange rate will continue to be firm, and speculators expect its currency to appreciate, so they sell other countries' currencies and buy them. This speculative capital flow can amplify the fluctuation range of exchange rate (accelerate the process of currency depreciation or currency appreciation), thus making the exchange rate more unstable.
(2) Transfer capital from countries with lower interest rates to countries with higher interest rates by taking advantage of interest rate changes or interest rate differences among countries to obtain spreads. The premise of this capital flow is that the exchange rates of the two countries are relatively stable, that is, under the premise of no exchange rate risk, capital flows earn spreads.
(3) Take advantage of the changes in securities prices in the international financial market, mobilize short-term foreign exchange funds, participate in securities trading, buy cheap and sell expensive, and profit from it.
In addition, we can also make use of the gold price in the gold market and the price changes in the international commodity market to engage in speculative short-term capital flows. The former, such as speculators, take advantage of certain political events or rumors that a certain currency may appreciate or depreciate, use speculative capital to attack the gold market, buy gold in a certain currency or sell it in exchange for a certain currency, raise or lower the price of gold, and profit from it. The latter, such as speculators, buy at a low price, sell at a high price, or sell at a high price and make up for it at a low price according to the price fluctuation of important commodities to earn speculative profits.