A speculative attack refers to relentless shorting of a particular currency by forex market participants. The term is mostly used by the target nation’s government and the media. The position created by massive shorting of a nation’s currency usually forces it down in value, no matter the tactics the nation’s central bank attempts.
Calling legitimate trading a speculative attack is definitely more political rhetoric than fact. Often, the nation on the receiving end of a “speculative attack” has been mishandling its currency and its economy for a long time before the shorts begin to pile on. The telltale sign that a speculative attack actually reflects fundamentals is that many of the attacked currencies take years to recover even after the short pressure has been taken off.
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