Thailand’s baht devaluation began the 1997 Asian financial crisis and regional market crash.
On July 2, 1997, Thailand abandoned its fixed exchange-rate system and allowed the baht to float after spending foreign-exchange reserves defending its value. The currency rapidly depreciated, exposing weaknesses in Thailand's banks, property sector, and heavily indebted companies. The decision is widely treated as the crisis's starting point.
The turmoil spread because many Asian economies had accumulated large amounts of short-term foreign-currency debt while maintaining exchange-rate arrangements that encouraged borrowing. Investors began to withdraw capital, currencies weakened, and stock markets fell across Southeast and East Asia. Indonesia, South Korea, and Malaysia were among the countries hit particularly hard.
The crisis was not simply a stock-market event. Currency collapses, bank failures, corporate insolvencies, and recession reinforced one another. The International Monetary Fund arranged assistance programs for Thailand, Indonesia, and South Korea, although the conditions attached to those programs remain debated. Thailand's baht was therefore the first major currency in the episode to be formally released from its peg.