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What is a currency crisis? What effect does it have on the stock market?
When the economy is bad, or when the whole society fluctuates to a certain extent, we may hear the word "currency crisis". What is a currency crisis? These countries have experienced such crises. Will this affect the stock market when it happens? How to prevent it when it happens? These problems will be introduced one by one in the following content. If you happen to be interested in these, what are you waiting for?

What kind of financial situation is the currency crisis? Generally speaking, interpretation is divided into narrow sense and broad sense. First, in a narrow sense, it mainly refers to those countries that implement a fixed exchange rate system. When they are in a passive situation, they will adjust their exchange rate system and usually turn to a floating exchange rate system. But in general, the exchange rate determined by this market is higher than the original deliberately maintained level, so it will cause some uncontrollable and bad effects. This phenomenon is called currency crisis, which is mainly related to the exchange rate.

But in a broad sense, it is easy to explain, which mainly means that a series of bad events will happen when the exchange rate changes beyond the range that a normal country deliberately bears.

Why is there a serious exchange rate change in a country? What is the main reason? Below we summarize some reasons to help us better understand the currency crisis.

First, generally speaking, the overvalued exchange rate in the market, the decline of national exports, the slowdown of economic activities, and the huge current account deficit. Can be seen as a precursor to a possible currency crisis.

Second, but from the actual situation, the currency crisis is mainly caused by the bursting of the bubble economy, serious imbalance of international payments, financial crisis, excessive foreign debts, increased bad debts of banks, political turmoil and distrust of the government.

Third, in recent years, more and more countries have abandoned the fixed exchange rate system, mainly because it is an infeasible scheme under the condition of large-scale and rapid flow of international capital.

Fourth, generally speaking, some countries have improper exchange rate policies, insufficient foreign exchange reserves, fragile banking systems, too fast opening of financial markets (such as Mexico and Thailand) and heavy foreign debt burdens.

In the 1990s, international financial crises frequently occurred in the market, and Turkey was one of them. Take the recent plunge in the exchange rate of the Turkish lira against the US dollar as an example, which is caused by Turkey's very serious trade deficit, high debt and particularly serious inflation.

At this point, this article is all over. I hope the above content is helpful to you. If you want to know more about the basics of securities, such as the futures account threshold of stock index, please pay more attention to us. There is a wealth of knowledge waiting for you here. Thank you for reading this.