Soros shorting the pound How did Soros make money by shorting the pound? When he sold the pound and made its price to decrease, he had to buy it back again to return the amount he borrowed, but doesn't buying the pound raise its price, so that he should not make any profit?
How did Soros make money by shorting the pound?


As a preamble, it is important to keep in mind the context in which this occurred: 


Two years earlier (in 1990), the UK government had made the controversial and largely political decision of becoming a member of the Exchange Rate Mechanism (ERM);
eventually, the macroeconomic reality presented a dilemma to UK
policymakers: (1) to devaluate the pound, or (2) to raise interest rates;
the UK government discarded devaluating the pound because the extent of an effective devaluation would discredit the UK government's ERM decision and be politically detrimental;
but UK policymakers also refused to raise interest rates, since that would strangle UK's already troubled economy and trigger another crisis (e.g., borrowers ending up with negative equity).


Soros was able to close his short position profitably because:


when the UK decided to enter ERM,
the UK unilaterally chose a sterling/DMark exchange rate which was recklessly high from the start (and impliedly, without anticipation or consideration of complications that could subsequent ensue in the economy);
the UK government stubbornly embraced the ERM as the magic solution
for its economy, and it ignored the macroeconomic growing disparities between German economy and that of the UK &amp; members of the ERM;
the Deutsche Bundesbank decided to raise its interest rates so as to curb the inflation in Germany as well as the costly process of Germany's reunification;
the UK ministers' political stand was so arrogant that they naively presumed they could compel the Deutsche Bundesbank to tailor its policies so as to help the UK ministers avoid the discredit and embarrassment for having made the wrong decision as to joining the ERM;
after Italy devaluated its currency in 1992, there was mounting pressure or expectation that the UK would have to follow suit due to the systemic imbalances that were ensuing;
Soros (or his company) was not the only entity selling/shorting pounds in the critical days of September of 1992;
in the morning of September 16, the UK government raised rates from
10% to 12%, thereby fueling the selling of pounds because the markets
interpreted the abrupt raise of rates as a sign of weakness;
hours later, the UK government desperately raised the rates to 15%;
short time later that day, the UK government suddenly desisted from its attempt to keep the pound within the ERM range, at which point the pound went in free
fall (also the increase to 15% was withdrawn).


Buying pounds back so as to close Soros's short position simply could not reverse the free-fall of the pound that resulted from UK government's prolonged stubbornness/arrogance and its subsequent, sudden erraticism.