TINSTAAFL but TINASAYSTT
(The second one means "this is not as simple as you seem to think." Neat, huh)
I didn't say there was a free lunch in currencies. It may be a very expensive lunch. It may be very hard to find. All I said was that experts in the field argue that there may be food available.
Not sure I agree with your oil analogy, Grundy. Firstly, even in the circumstances you suggest, if a hedger is prepared to pay up for price certainty, then he might do so even over the (higher) price established by the market. Secondly, oil prices have been determined historically more by supply issues (from a cartel) than anything else. But most importantly, I think it misses the dynamic element present in currencies. Hedgers presumably sometimes want dollars, sometimes euro, sometimes sterling, sometimes yen. And they're prepared to pay in sometimes dollars, sometimes euro, sometimes sterling, sometimes yen. And they operate in an enviroment where other influences are also affecting the prices of these currencies. Smart people feel they can take (a relatively small) advantage of that. Sorry for using the word "arbitrage" sloppily in the last post, by the way. I meant price inefficiency rather than arbitrage in the classic sense.
Brendan, if you're looking for long-term losers in the currency markets, look no further than Central Banks. Their constitutions almost pre-ordain them to be losers .. they buy their (or someone else's) currencies when they're under pressure (ie the market believes them to be overvalued), selling other currencies to do so. And the rest of the time they are essentially passive investors with no significant return objectives.
It's the differing motivations of corporates, Central Banks, travellers, etc, that provide the price inefficiencies that currency experts claim to be able to exploit. So it may not be the zero-sum game you think it is.
If you're interested, have a look at the following links:
www.bwater.com/research_currency.htm.