Suppose a Country That Has Been Pegging Its Currency Is

Multiple Choice

Suppose a country that has been pegging its currency is faced with a situation where financial market participants now expect some future devaluation. In such a situation, we would generally expect which of the following to occur?

A) An increase in investment.
B) An increase in domestic stock prices.
C) An increase in demand for the country's currency.
D) An increase in interest rates.
E) An announcement by the central bank that a large devaluation will occur in the near future.