Speculative Attacks

Speculative attacks occur when investors bet against a currency by selling it in large amounts, anticipating that its value will drop. This can create pressure on a country's currency, leading to instability. Such attacks often happen when investors lose confidence in a country's economy or financial practices. If a central bank cannot maintain its currency's value through interventions, it may lead to a devaluation, making imports more expensive and potentially sparking economic turmoil. Essentially, it's a scenario where market speculation can drive significant financial shifts in a country.