The Thai baht’s devaluation in July 1997 helped trigger the Asian financial crisis and major market crashes across the region.
Thailand had maintained a fixed exchange-rate relationship between the baht and the U.S. dollar. After heavy borrowing, a property boom and growing doubts about Thailand’s financial system, speculators attacked the currency. On 2 July 1997, Thailand allowed the baht to float, and its value fell sharply.
The currency crisis quickly spread. Investors withdrew capital from other Asian economies, stock markets fell and several currencies came under intense pressure. Indonesia, South Korea and Malaysia were among the countries most affected, although the severity and timing differed from country to country.
The baht devaluation was the trigger, not the only underlying cause. Large foreign-currency debts, weak banks, overinvestment and fixed exchange rates made several economies vulnerable. The International Monetary Fund organized rescue programs for Thailand, Indonesia and South Korea.