The Thai baht’s devaluation marked the beginning of the 1997 Asian financial crisis.
Thailand abandoned its fixed exchange-rate policy on July 2, 1997, allowing the baht to float. The currency had faced intense speculative pressure after Thailand accumulated large foreign debts and its property and financial sectors became vulnerable to a loss of confidence.
The baht’s fall quickly affected other economies. Investors withdrew funds from Indonesia, South Korea, Malaysia, and the Philippines, placing pressure on their currencies, banks, and stock markets. The crisis was amplified by short-term foreign borrowing, weak financial regulation, and companies carrying substantial debt denominated in U.S. dollars.
The International Monetary Fund organized rescue programs for several affected countries, including Thailand, Indonesia, and South Korea. The episode is called the Asian financial crisis, although its effects were especially severe in East and Southeast Asia rather than across every Asian economy.