The Thai baht’s devaluation in July 1997 helped begin the Asian financial crisis.
Thailand abandoned its fixed exchange-rate policy on July 2, 1997, allowing the baht to float after intense pressure on the country’s foreign-exchange reserves. The currency then lost substantial value, exposing weaknesses in heavily indebted banks and companies that had borrowed in foreign currencies.
Financial stress spread to other Asian economies, including Indonesia, South Korea and Malaysia. Stock markets fell, currencies depreciated, businesses failed, and governments sought assistance from the International Monetary Fund and other international institutions.
The baht was not the only currency involved, and the crisis had several causes. Large short-term foreign debts, property and asset bubbles, weak financial supervision, and fixed exchange rates that investors considered unsustainable all contributed. The crisis is therefore broader than the Thai devaluation, even though Thailand is widely regarded as its starting point.