Thailand’s currency devaluation on July 2, 1997, marked the beginning of the Asian financial crisis.
Thailand had maintained the baht within a managed exchange-rate system, but heavy borrowing, falling property prices, and pressure on foreign-exchange reserves made the arrangement difficult to defend. On July 2, authorities allowed the baht to float and it rapidly lost value.
The shock spread across economies with substantial foreign-currency debt and fragile financial sectors. Indonesia, South Korea, Malaysia, and other markets experienced sharp currency declines, banking problems, recessions, and emergency international assistance. The crisis was regional, although its effects differed from country to country.
A common mix-up is to identify Indonesia or South Korea as the starting point because their later crises were severe. Thailand is the precise answer because the baht’s float began the episode generally called the Asian financial crisis.