The 1997 Asian financial crisis was triggered when Thailand abandoned its fixed exchange rate and allowed the baht to float.
Thailand made the decision on July 2, 1997, after heavy speculative pressure exhausted much of the country’s foreign-exchange reserves. The baht rapidly depreciated, increasing the local-currency burden of dollar-denominated debts held by Thai companies and financial institutions.
Investor fear spread across East and Southeast Asia. Currencies and stock markets in Indonesia, South Korea, Malaysia, and the Philippines came under intense pressure. Many businesses had borrowed in foreign currencies without adequate protection against exchange-rate movements, making devaluation especially damaging.
The International Monetary Fund arranged assistance programs for several affected economies, including Thailand, Indonesia, and South Korea. The crisis was not simply a stock-market event: currency pegs, banking weaknesses, short-term foreign borrowing, and property bubbles all played important roles. The baht’s float is the key initiating event most commonly cited.