The Thai baht was the first major currency forced to abandon its dollar peg during the 1997 Asian financial crisis.
On July 2, 1997, Thailand’s government allowed the baht to float after spending much of its foreign-exchange reserves defending the currency. The baht then depreciated sharply, and financial stress spread through several Asian economies. Thailand’s decision is widely regarded as the crisis’s starting point.
The country had accumulated heavy foreign debts, much of them short-term and denominated in foreign currencies. A property boom, weak financial institutions, and concerns about Thailand’s ability to defend the peg encouraged speculative pressure. Once the peg broke, companies and banks faced much larger debt burdens in local-currency terms.
The turmoil spread to Indonesia, South Korea, Malaysia, and other markets, though each economy had different vulnerabilities. The International Monetary Fund organized assistance programs for several affected countries. The baht was not the only currency to fall dramatically, but it was the first central trigger of the regional crisis.