The Thai baht triggered the 1997 Asian financial crisis when Thailand abandoned its fixed exchange rate on July 2, 1997.
Thailand had maintained the baht within a narrow range against the U.S. dollar, but speculative pressure and falling foreign-exchange reserves made that policy increasingly difficult to defend. After the peg was abandoned, the baht depreciated sharply. Investors then reassessed other Asian economies with high foreign borrowing, property-market weaknesses or vulnerable banking systems.
Contagion spread through financial markets and currencies in Indonesia, Malaysia, South Korea and elsewhere. The crisis involved bank failures, corporate debt problems, recession and emergency international assistance. The International Monetary Fund arranged programs for several affected countries, including Thailand, Indonesia and South Korea.
The crisis is sometimes called the “Asian currency crisis,” but it was broader than exchange-rate turbulence alone. Banking fragility, short-term foreign debt, capital flight and falling asset prices all played important roles.