Thailand devalued the baht on July 2, 1997, helping trigger the Asian financial crisis.
For years, Thailand had maintained a near-fixed exchange rate between the baht and the U.S. dollar. Large capital inflows encouraged borrowing, including substantial foreign-currency debt. As concerns grew about property prices, current-account deficits, and the country’s ability to defend the currency, speculators came under pressure to sell baht.
The Bank of Thailand spent foreign-exchange reserves defending the currency before allowing it to float. The baht then lost substantial value, and financial stress spread across Asia. Indonesia, South Korea, Malaysia, and other economies experienced currency declines, corporate failures, banking problems, and recession.
The crisis is often called the Asian financial crisis, although its first major currency break occurred in Thailand. The International Monetary Fund organized assistance programs for several affected countries. The episode also showed how quickly a currency crisis can become a banking and stock-market crisis when economies are heavily indebted.