The change of perception tends to be far larger than the magnitude of the underlying change warrants. The frightening aspect is that there is a very strong element of self-fulfilling prophecy in the change of perception. Currency crises happen to a significant extent because lenders and investors fear they can happen. The fact that they first stop lending and investing and then pull out contributes greatly to making their worst nightmares come true. As a result, there can be much overshooting.
Exchange rates can collapse, as can stockmarkets and property prices.
Governments or central banks are forced to raise interest rates to defend the currency. As a result, banking systems become far more fragile than they were before, as previous weaknesses are magnified and new faultlines emerge. Currency crises have punitive development costs. This makes preventing them absolutely essential. A condition for crisis prevention is that countries follow prudent macroeconomic policies.