What factors may lead to a currency crisis?

A currency crisis typically arises from a combination of several critical factors that can destabilize a country's currency. High levels of debt, for instance, can lead to concerns about a government's ability to meet its financial obligations. When investors perceive a country as being over-leveraged, they may panic and start to sell off that currency, causing it to depreciate sharply.

Political instability is another significant risk factor. When a country experiences uncertainty regarding its political landscape—whether due to government turnover, civil unrest, or potential policy changes—it can lead to a lack of confidence both from foreign and domestic investors. This erosion of trust can lead to capital flight, where investors withdraw their funds, further straining the currency.

Rapid economic changes, such as sudden shifts in inflation rates or economic contractions, can also contribute to a currency crisis. If economic fundamentals are not aligned with market expectations, it may lead to volatility and uncertainty in the foreign exchange markets.

In contrast, the other options outline scenarios that typically do not lead to a currency crisis. Low interest rates and economic stability suggest a healthy economic environment, where investors are likely to have confidence in the currency. Increased tourism and trade surplus generally contribute positively to a country's balance of payments, strengthening the currency rather than weakening it.