Thailand’s currency crisis helped spark the 1997 Asian financial crisis.
Thailand maintained the baht’s value against a basket dominated by the U.S. dollar. Heavy borrowing, property speculation, and large foreign-currency debts made the arrangement increasingly difficult to defend. Speculators sold the baht, putting pressure on Thailand’s foreign-exchange reserves.
On 2 July 1997, Thailand allowed the baht to float. Its sharp depreciation signaled that other Asian economies could also be vulnerable. Financial stress then spread to Indonesia, South Korea, Malaysia, and the Philippines, among other markets. Stock prices and exchange rates fell, while companies and banks struggled with debts denominated in foreign currencies.
The crisis was not simply a stock-market event. It combined currency devaluation, banking failures, corporate debt, and international capital flight. The International Monetary Fund organized assistance programs for several affected economies. The episode also led many Asian governments to accumulate larger foreign-exchange reserves afterward.