What is a speculative attack on a currency?
A)National governments decide to engage in competitive devaluations against a given country.
B)International organizations such as the WTO and the IMF attempt to reorder the currency's system.
C)Private investors sell domestic currency and buy foreign currency, betting that the domestic currency will soon be devaluated.
D)Casinos in Las Vegas allow the proliferation of bets for and against a given currency.
E)A country is at war, and the enemy country "freezes" all the accounts denominated in the local currency.

Question

Quizplus · Accepted Answer

A speculative attack on a currency occurs when private investors sell the domestic currency and buy foreign currency, which leads to a decrease in the value of the domestic currency. This speculation is often based on market expectations that the domestic currency will be devalued, leading to a profitable investment decision. It is a form of currency market manipulation where investors seek to profit from fluctuations in exchange rates. Other options mentioned, such as competitive devaluations by governments or international organizations' attempts to reorder a currency system, do not necessarily involve speculative attacks by private investors.

What Is a Speculative Attack on a Currency