During the 1997 Asian financial crisis, the Thai baht’s devaluation triggered the initial market turmoil.
Thailand abandoned its fixed exchange-rate arrangement on July 2, 1997, allowing the baht to float after intense pressure from currency speculators. The currency rapidly lost value, and financial stress spread through regional markets and banking systems.
The crisis affected Indonesia, South Korea, Malaysia, and other economies. Many companies and banks had borrowed heavily in U.S. dollars, so the falling local currencies made those debts much more expensive to repay. Stock markets declined as investors reassessed regional risk.
The baht was not the only currency damaged: Indonesia’s rupiah and South Korea’s won suffered major falls later. The International Monetary Fund organized rescue programs, including a large package for South Korea, but the crisis caused severe recessions and political upheaval across the region.