Which of these steps usually comes first in a currency crisis?

Question

Quizplus · Accepted Answer

Typically, a currency crisis begins when the government faces difficulty in maintaining a fixed exchange rate. This could happen due to various reasons such as trade imbalances, inflation, political instability, etc. Once the fixed exchange rate becomes unsustainable, the government may be forced to float the currency or devalue it, which leads to the next steps such as investors selling the currency and higher interest rates to defend the currency.

Which of These Steps Usually Comes First in a Currency