The Thai baht's devaluation helped trigger the regional market collapse during the 1997 Asian financial crisis.
Thailand had maintained a baht exchange rate closely linked to the U.S. dollar, while borrowing and property speculation expanded rapidly. As foreign investors lost confidence, they sold Thai assets and pressured the central bank to spend its reserves defending the currency.
On July 2, 1997, Thailand abandoned the baht's fixed exchange-rate regime and allowed it to float. The currency then fell sharply, and financial stress spread through Indonesia, South Korea, Malaysia and other economies. Stock markets across the region suffered dramatic declines.
The crisis was not caused by one factor alone. Large foreign-currency debts, weak financial institutions, property bubbles and sudden capital outflows all contributed. The International Monetary Fund organized rescue programs for several affected countries, including Thailand, Indonesia and South Korea.