The Thai baht was devalued on July 2, 1997, helping ignite the Asian financial crisis.
Thailand had maintained the baht’s value closely against the U.S. dollar, but growing current-account deficits, heavy foreign borrowing, and pressure on the currency made that policy increasingly difficult to defend. After spending reserves to support the baht, the government allowed it to float on July 2.
The baht’s fall quickly became a regional financial shock. Investors reassessed economies with similar vulnerabilities, and currencies and stock markets in Indonesia, Malaysia, South Korea, and elsewhere came under pressure. Corporate and bank debts denominated in foreign currencies became much more expensive to repay.
The crisis was not simply a currency event. It combined exchange-rate pressure, weak financial institutions, excessive borrowing, and sudden reversals of international capital. The International Monetary Fund arranged assistance programs for several affected countries, including Thailand, Indonesia, and South Korea.