The Thai baht was devalued during Thailand’s 1997 crisis, helping launch the Asian financial crisis.
Thailand had maintained a largely fixed exchange rate against the U.S. dollar while borrowing heavily, particularly through short-term foreign-currency debt. Real-estate and financial speculation expanded, and pressure against the baht increased. On July 2, 1997, Thailand allowed the currency to float after authorities could no longer defend its exchange rate effectively. The baht then lost substantial value.
Financial stress spread across East and Southeast Asia. Indonesia, South Korea, Malaysia, and other economies faced currency declines, capital flight, bank failures, or emergency international assistance. The International Monetary Fund assembled programs for several affected countries, although the conditions attached to those programs remained controversial.
The crisis is often called the Asian financial crisis, but it was not simply a stock-market event. Currency mismatches, excessive borrowing, weak financial supervision, and sudden reversals of foreign capital all played roles. Thailand’s baht decision is widely treated as the crisis’s starting point.