Although speculators like George Soros can pull huge profits out of the foreign exchange market, sometimes their currency bets backfire. Consider the case of Controladora Commercial Mexicana SAB (Commercial Mexicana), the owner of supermarkets and Costco stores in Mexico.
One day in October 2008, Commercial Mexicana was prospering as Mexico's third largest retailer and a competitor of discount giant Walmart. A few days later, the family-owned chain went bankrupt, decimated by foreign currency losses that resulted in the firm losing almost half its value. Why did this occur? 

Commercial Mexicana and other Mexican firms made bad bets using currency contracts obtained from big banks such as JPMorgan Chase & Co, that were linked to the dollar/peso exchange rate. Their bets were based on expectations of a stronger peso. However, the world credit crisis of 2008 threw the peso into a tailspin. Mexico's central bank, seeing the risk to its economy, sold billions of dollars from its reserves to purchase the weakening peso and thus prop up its value. The central bank burned through about 13 percent of its international currency reserves in this strategy, which turned out to be futile:  Mexico's peso plummeted 24 percent in October of 2008 as risk-averse investors yanked money from the country.
Under the currency deal, JPMorgan Chase & Co. offered Commercial Mexicana financing and currency trades at favorable rates. But there was a hitch. If the dollar strengthened (the peso depreciated) beyond a certain threshold, then the firm would have to sell dollars at a loss. In some cases, the contracts had triggers that doubled the number of dollars the firm sold.

When Commercial Mexicana purchased the currency contracts, the deals were initially profitable. But soon things deteriorated as investors panicked over the global financial crisis and began pulling money out of Mexico. As the peso depreciated, Commercial Mexicana encountered losses of $1.4 billion. Being unable to pay its debt, the firm filed for bankruptcy. Rather than sticking to its business of selling tomatoes and digital cameras to Mexican shoppers, Commercial Mexicana tried to make money on the dollar/peso exchange rate. However, the firm was unprepared for the destabilizing effects of the global financial crisis of 2008.

 What do you think? Are you willing to take the risk to become a currency speculator?