The Thai baht was forced to devalue during the 1997 Asian financial crisis, triggering the crisis in Thailand.
Thailand had maintained a close link between the baht and the U.S. dollar while borrowing heavily in foreign currencies. Speculators increasingly believed the exchange-rate arrangement could not be defended. On July 2, 1997, Thailand abandoned the baht’s fixed exchange-rate regime and allowed it to float.
The baht’s sharp fall exposed banks and companies with dollar-denominated debts. Financial pressure then spread across East and Southeast Asia, affecting Indonesia, South Korea, Malaysia, and other economies. Stock markets fell, currencies weakened, and international rescue programs followed.
The crisis is sometimes called the Asian currency crisis because exchange rates were central, but its consequences included major stock-market crashes and banking failures. The baht’s devaluation is widely treated as the starting point.