Comment on the following: Speculation is the prime reason for foreign exchange rate fluctuations.

Speculation or the anticipation of the market participants many a times is the prime reason for exchange rate movements. The total foreign exchange turnover worldwide is many a time the actual goods and services related turnover indicating the grip of speculators over the market. Those speculators anticipate the events even before the actual data is out and position themselves accordingly to take advantage when the actual data confirms the anticipations. The initial positioning and final profit taking make exchange rates volatile.