While talking over the issue of "the demand for HK$ is not the cause of the slide of US$ (assume no peg)", my associate broght out several examples of how producers of goods want more dollars for thier goods to show that demand for more dollars cause US$ slide vis-a-vis HK$. (Just curious: whehter it is the demand of HK$ or demand of goods causes US$ to slide.) :-) :-)
Assume no currency peg.
He highlighted another example of how fund managers make their money by currency arbitrage operations (his quote: "How do you think Soros makes his money ?").
My impression of currency arbitrage is that the window of opportunity for this operation exists very briefly, because the amount of money that fund managers can move and that this is a zero-sum game, the exchange rate gap will be closed very quickly.
In other words currency arbitrage is but a side-show, never the course of fund managers.
Please throw some lights on the above statement.
Thanks.