Speculative Attack

A speculative attack occurs when investors sell large amounts of a country’s currency or financial assets, betting that the value will depreciate or that the government will be forced to devalue its currency. These attacks are typically triggered by signs of economic instability or vulnerabilities in the country's financial policies. Speculative attacks can lead to currency crises and force central banks to intervene, often by using foreign reserves or raising interest rates.

Example

During the 1997 Asian financial crisis, several Southeast Asian countries experienced speculative attacks on their currencies, leading to severe devaluations and economic turmoil.