What is the primary effect of speculative trading on a currency's value?

Speculative trading can greatly influence a currency's value by creating fluctuations based on traders' expectations about future economic conditions. When traders believe a currency will strengthen, they buy it, increasing demand and causing its value to appreciate. For example, if many traders think that a country's economy will improve due to new technology, they might buy that country's currency in anticipation of higher value. Conversely, if they expect a downturn, they may sell the currency, leading to depreciation. Thus, speculation can cause rapid changes in currency value, often unrelated to the actual economic fundamentals.