Hot money

Hot money is used in economics to refer to funds which flow into a country to take advantage of a favourable interest rate, and therefore obtain higher returns. They influence the balance of payments and strengthen the exchange rate of the recipient country while weakening the currency of the country losing the money. These funds are highly volatile and will be shifted to another foreign-exchange market when relative interest rates make this more profitable. It is money held in currency markets by speculators.

See also

• Arbitrage