The Thai baht collapsed first in the 1997 Asian financial crisis, triggering a regional market sell-off.
Thailand had maintained a currency arrangement that effectively tied the baht to the U.S. dollar. Heavy borrowing, property speculation, weak financial institutions, and pressure from currency traders made the arrangement difficult to defend. On July 2, 1997, Thailand abandoned the baht’s fixed exchange-rate regime and allowed it to float.
The baht’s devaluation quickly affected confidence across East and Southeast Asia. Investors reassessed economies with similar vulnerabilities, and currencies including the Indonesian rupiah and South Korean won came under intense pressure. Stock markets fell, companies struggled with foreign-currency debt, and several governments sought international assistance.
The crisis was not simply a stock-market crash. It combined currency devaluations, banking failures, debt problems, and recessions. The International Monetary Fund organized major assistance programs, including a package for South Korea.