A speculative attack on a country with a fixed exchange rate occurs when:

Question

Quizplus · Accepted Answer

A speculative attack on a country with a fixed exchange rate occurs when financial market participants believe that the government will have to devalue its currency. This belief causes an increase in demand for foreign currency, putting pressure on the local currency's exchange rate. As a result, the government may be forced to devalue its currency to maintain the exchange rate or risk depleting its international reserves.

A Speculative Attack on a Country with a Fixed Exchange