Which financial crisis began with Thailand’s decision to float the baht in July 1997?

Thailand’s decision to float the baht in July 1997 began the Asian financial crisis.

For years, Thailand had maintained a managed exchange rate while borrowing heavily, much of it in foreign currencies. Pressure from declining exports, property speculation, and falling confidence made the arrangement difficult to defend. On July 2, 1997, Thailand abandoned the baht’s fixed exchange-rate regime and allowed the currency to float.

The baht then depreciated sharply, and financial stress spread to other economies. Indonesia, South Korea, and several neighboring markets experienced currency collapses, stock-market declines, corporate failures, and banking crises. International rescue programs, including a major International Monetary Fund package for South Korea, followed.

The crisis was regional rather than a single synchronized stock-market crash. Its effects differed by country, and some economies recovered at different speeds. The episode also showed how foreign-currency debt and rapidly reversing capital flows could transmit pressure across closely connected financial markets.