| || What is the definition of Speculative Attack? |
A speculative attack is seen when market traders sell a currency in a drastic fashion.
The term tends to be used by media outlets to describe excessive volatility as
currency values make significant declines.
| || TradersLaboratory decodes Speculative Attack |
Speculative Attack is a term that refers to a collective strategic investment that is made in order to push market prices in a specific direction. The word “attack” in this case can be viewed as an attempt to influence market activity.
Defining what is actually a legitimate speculative attack can be difficult to do. Many
argue that the use of the term is more closely related to political rhetoric, rather
than an adherence to statistics. One way of understanding whether or not a true
speculative attack has occurred can be seen in the length of time it takes for the
currency to recover to previous levels. Quick recoveries are seen as less legitimate
than recoveries that take years.
An example of a speculative attack can be seen in the legacy of George Soros. In the 1990s, Soros led a speculative attack to drive down the value of the British pound in the face of questionable central bank activities.