Exchange rate crisis

An exchange rate crisis occurs when a country’s currency rapidly loses its value relative to other currencies, often unexpectedly. This drop can happen due to economic instability, high debt levels, or loss of investor confidence. When the currency weakens, it becomes more expensive to buy foreign goods or pay foreign debts, leading to inflation and economic uncertainty. Governments and central banks may try to stabilize the situation through measures like increasing interest rates or artificial currency support, but if these fail, it can trigger a full-blown financial crisis affecting individuals, businesses, and the economy overall.