Thailand’s currency devaluation in July 1997 helped start the Asian financial crisis, after the country abandoned the baht’s dollar peg.
On July 2, 1997, Thailand allowed the baht to float after spending foreign-exchange reserves defending its fixed exchange rate. The baht then lost substantial value. Investors reassessed other Asian economies, many of which had large foreign-currency debts, property bubbles, weak financial institutions, or heavily leveraged companies.
Pressure spread to Indonesia, South Korea, Malaysia, and other markets. Stock prices and exchange rates fell, businesses faced rising debt burdens, and several countries required international assistance. The International Monetary Fund arranged major rescue programs, including a large package for South Korea.
The crisis is sometimes called the Asian currency crisis, but its effects included severe stock-market declines, banking problems, recessions, and political change. Thailand’s devaluation was the opening shock, not the only underlying cause.