speculative attack

A speculative attack occurs when investors collectively doubt a country's currency sustainability and start selling off its currency or government bonds quickly. This rush can pressure the country's central bank to spend large amounts of its foreign reserves to defend the currency's value, potentially leading to a financial crisis. Essentially, it’s a self-fulfilling cycle: the fear of devaluation causes more selling, which then makes devaluation more likely. It often happens when investors suspect a country's economic policies or situation are unstable, prompting them to act aggressively to profit from or protect their investments.