The Asian Crisis of 1997

The Asian financial crisis, often known as the "Asian Contagion," was a series of events that started in July 1997 and extended throughout Asia, including currency devaluations and other things. The crisis began in Thailand when the government withdrew the de facto peg of the local currency to the US dollar after using up a large portion of the nation's foreign exchange reserves in an effort to protect it from months of speculative pressure.

Just a few weeks after Thailand stopped protecting its currency, pressure from the speculative market forced Malaysia, the Philippines, and Indonesia to do the same. By October, the crisis had moved to South Korea, where the government was on the verge of default due to a balance-of-payments problem.

There was pressure on other economies as well, but those with strong economic fundamentals and sizable foreign exchange reserves fared far better. Hong Kong's currency, which is tied to the U.S. dollar via a currency board system and supported by sizable U.S. dollar reserves, has withstood a number of significant but unsuccessful speculative attacks.