The Thai baht collapsed in 1997, helping trigger the Asian financial crisis and stock-market crashes across the region.
Thailand had maintained a close link between the baht and the U.S. dollar while borrowing heavily in foreign currencies. Pressure built as investors questioned Thailand’s reserves, financial institutions, and property boom. On July 2, 1997, Thailand allowed the baht to float, and it depreciated sharply.
The crisis spread through interconnected banks, corporations, and investment markets. Indonesia’s rupiah and South Korea’s won later came under intense pressure, while equity markets across Asia plunged. Many borrowers had debts denominated in dollars, so the falling local currencies made those obligations much more expensive.
The baht was the first major currency at the center of the crisis, but it was not the only currency affected. The International Monetary Fund arranged assistance programs for several countries, including Thailand, Indonesia, and South Korea. The episode shows how a currency crisis can transmit rapidly into stock markets and banking systems.