The Thai baht’s collapse triggered the 1997 Asian financial crisis after Thailand abandoned its fixed exchange-rate regime.
On July 2, 1997, Thailand allowed the baht to float after intense pressure on its foreign-exchange reserves. The currency then depreciated sharply, exposing companies and banks that had borrowed heavily in foreign currencies. Financial stress spread across the region.
Indonesia, South Korea, Malaysia, and other economies faced currency falls, capital flight, banking failures, and recessions. Stock markets also plunged, so the crisis was both a currency crisis and a wider financial-market shock. The International Monetary Fund arranged rescue programs for several affected countries, including Thailand, Indonesia, and South Korea.
A common mistake is to identify the South Korean won or Indonesian rupiah as the original trigger. Those currencies suffered later in the spreading crisis. The baht was the first major currency whose devaluation marked the beginning of the regional turmoil.