The Thai baht was forced to float on July 2, 1997, after Thailand abandoned its exchange-rate peg.
Before the crisis, Thailand maintained a managed exchange rate that closely linked the baht to a basket dominated by the U.S. dollar. Speculators attacked the currency after concerns grew about Thailand’s current-account deficit, heavy foreign borrowing, and weaknesses in its financial sector. The central bank spent reserves defending the peg, but eventually ended the defense and allowed the baht to float.
The baht’s devaluation helped trigger a wider regional crisis. Financial pressure spread to Indonesia, South Korea, Malaysia, and other economies, causing stock-market falls, bankruptcies, unemployment, and emergency international lending programs. The International Monetary Fund arranged a major assistance package for Thailand. A common mistake is treating the crisis as only a stock-market event: currency collapses and banking-sector stress were central parts of it. The turmoil also prompted many Asian economies to build larger foreign-exchange reserves and reconsider short-term external borrowing.