July 2, 1997

1997 Asian financial crisis

Thailand switches the baht to a managed float

After spending US$24 billion defending the baht, the central bank was reportedly down to US$2.85 billion in usable reserves.

2 July 1997: the basket is abandoned

On 2 July 1997 the Bank of Thailand abandoned the fixed exchange-rate system based on a basket of trading-partner currencies and announced a managed float for the baht. The last recorded rate under the basket system, on 30 June, was 25.79 baht to the US dollar.

The baht depreciated by approximately 15–20% on the day it was floated. What replaced the peg was a managed float, not an unrestricted one.

The defence had depleted the reserves

The change followed months of speculative pressure and failed interventions. The central bank had spent US$24 billion — about two-thirds of total reserves — defending the currency.

Usable reserves reportedly remaining before the float came to US$2.85 billion. Sustained selling of baht and baht-denominated assets had left the authorities without enough to hold the old rate.

What the peg had been hiding

The regime Thailand abandoned was formally a basket peg dominated by the dollar rather than a simple statutory dollar peg. Its stability had concealed the exchange-rate risk carried by Thai banks and firms with foreign-currency debts, and that risk became visible immediately.

The devaluation is the conventional starting point of the Asian financial crisis, though Thailand's banking, debt and property-market problems had begun earlier. The baht's low of roughly 56 per dollar came in January 1998, not on 2 July.

Sources

Researched 23 Aug 2026 5 sources 2 audit passes

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