The reason why the Thai Baht exchange rate goes up when the dollar exchange rate goes up

There are two ways to buy the Thai Baht (THB).

Either trade directly using KRW, or convert to USD first and then trade.

But let's say a 'gap' (arbitrage opportunity) forms where the dollar goes up, but the Baht stays the same.

If you buy the Baht directly and sell it for dollars, you get a risk-free profit.

This is called triangular arbitrage.

Who does this? FX dealers (they're called dealers, but they're basically computers).

If that arbitrage 'gap' is tasty and people keep trading, what happens?

A lot of Baht is bought, and the Baht price goes up.

How much? As much as the dollar went up. (Once it gets this high, it's not tasty anymore.)

That’s why exchange rates worldwide are linked.

So, peace out.