Thailand’s devaluation of the baht marked the beginning of the 1997 Asian financial crisis.
On July 2, 1997, Thailand abandoned its fixed exchange-rate arrangement and allowed the baht to float. The currency then lost substantial value, exposing weaknesses in Thailand’s financial system and helping trigger a regional crisis.
Before the devaluation, Thailand had attracted large foreign capital inflows, much of which helped finance property and other speculative investments. Banks and companies accumulated foreign-currency debts, so the baht’s fall made those obligations far more expensive in local terms.
The crisis spread across East and Southeast Asia, affecting Indonesia, South Korea, Malaysia, and other economies. International Monetary Fund programs provided assistance to several countries. A frequent mistake is calling the episode only a currency crisis: collapsing stock markets, banking failures, corporate bankruptcies, and recession were also central parts of it.