The Thai baht’s devaluation triggered Thailand’s stock-market crash and the 1997 Asian financial crisis.
Thailand abandoned its fixed exchange-rate policy for the baht on July 2, 1997, allowing the currency to float after heavy pressure from currency traders and falling foreign-exchange reserves. The baht then lost substantial value, exposing borrowers who had debts denominated in U.S. dollars.
The shock spread across Asian economies. Investors withdrew capital from countries with large external debts, weak banking systems, or currencies perceived as overvalued. Stock markets and currencies in Indonesia, South Korea, Malaysia, and elsewhere came under severe pressure. The International Monetary Fund organized a major assistance program for Thailand.
The event is often called the Asian financial crisis, but it was not caused by one identical weakness in every country. Thailand’s property boom and short-term foreign borrowing were especially important. The crisis also showed how quickly modern capital flows could transmit financial stress between markets.