The Thai baht’s collapse in July 1997 marked the beginning of the Asian financial crisis and the subsequent regional stock-market crashes.
Thailand had maintained a largely fixed exchange rate against the U.S. dollar. After heavy pressure from speculators and a decline in foreign-currency reserves, the country allowed the baht to float on July 2, 1997. The currency then lost substantial value.
The shock spread because banks and companies across Asia had accumulated large amounts of short-term foreign-currency debt. A weaker local currency made that debt more expensive to repay, while investors withdrew capital from other markets they considered vulnerable.
Indonesia, South Korea, Malaysia, and the Philippines were among the countries affected. Stock markets fell sharply, businesses failed, and several governments sought assistance from the International Monetary Fund. The crisis was regional, although its effects differed from country to country.