Currency Crisis

A currency crisis occurs when a country’s currency experiences a sudden and significant devaluation, leading to a loss of investor confidence, capital flight, and economic instability. Currency crises are often triggered by a combination of factors, including high inflation, large current account deficits, political instability, or a lack of foreign reserves. A currency crisis can lead to higher interest rates, inflation, and a severe recession as the country struggles to stabilize its economy.

Example

The Argentine peso crisis in 2018 is an example of a currency crisis, where the peso lost significant value due to rising inflation, external debt, and a loss of investor confidence.