Liquidity of a currency can affect the extent to which speculation can impact the currency's value.

Question

Quizplus · Accepted Answer

If a currency has high liquidity, it means that there is a high demand for it and it can be easily bought and sold in the market. This can make it more difficult for speculation to have a significant impact on the currency's value, as there are enough buyers and sellers to balance out any potential price movements. On the other hand, a currency with low liquidity may be more susceptible to speculative attacks, as there may not be enough market participants to counteract large buy or sell orders.

Liquidity of a Currency Can Affect the Extent to Which