The speculative movement of international short-term funds is mainly to escape political risks and pursue the interests of exchange rate changes, important commodity price changes or international securities price changes. Hot money is the speculative behavior of pursuing the interests of exchange rate changes. When speculators expect the price of a currency to fall, they sell the forward foreign exchange of that currency in order to buy it at a lower spot foreign exchange after the futures expire, thus earning interest on the exchange difference. Because this is pure short-selling speculation, which is different from arbitrage.

In the foreign exchange market, this kind of speculative funds often convert the domestic currency with depreciation tendency into the currency with appreciation tendency, which increases the instability of the foreign exchange market. Therefore, as long as the expectation psychology exists, only by letting the appreciating currency fluctuate greatly or implementing foreign exchange control can this speculative capital flow be stopped.

The change of currency exchange rate is an excellent speculative opportunity for hot money. Hot money, that is, hot money, is short-term capital with strong speculation and quick liquidity, mainly speculating on a country's exchange rate changes in the international market.

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Four characteristics of hot money:

1, high yield and high risk. Pursuing high returns is the ultimate goal of the hot money movement in the global financial market. Of course, high returns are often accompanied by high risks, so hot money earns high-risk profits. They may have made money in this market and lost money in other markets, or made money at this time and lost money at that time, which also gave them the awareness and ability to take high risks.

2. Large amount of information and high sensitivity. Hot money is the darling of the information age. It is highly sensitive to the economic and financial situation and trend of a country or the world, to the exchange difference, spread and spread of various financial markets, and to the economic policies of relevant countries, and can be quickly reflected.

3. High liquidity and short-term. Based on high information and high sensitivity, they can enter quickly when they have money, and they can escape instantly when the risk increases. Show great short-term, even ultra-short-term, fast in and out in a day or a week.

This investment is highly fictitious and speculative. To say that hot money is a kind of investment funds mainly means that they invest in the global securities market and currency market in order to profit from the daily, hourly and minute price fluctuations of securities and currencies, that is, "Qian Shengqian", which has a certain lubricating effect on financial markets. If there is no risk aversion like hot money in the financial market, it is impossible for risk aversion to transfer risks. However, the investment of hot money neither creates jobs nor provides services, which is highly fictitious, speculative and destructive.

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Baidu encyclopedia-hot money