10 Bahts – Thailand

In 1990, Thailand's currency, the baht, operated under a de facto fixed exchange rate regime, pegged to a basket of currencies dominated by the US dollar. This system, managed by the Bank of Thailand (BOT), provided a crucial anchor for stability during a period of remarkable economic transformation. The country was in the midst of an export-led boom, with GDP growth exceeding 10% that year, fueled by foreign direct investment and a rapidly expanding manufacturing sector. The stable baht was instrumental in this growth, providing predictability for international trade and investment, and helping to control inflation.

However, this stability came with significant policy constraints. To maintain the peg, the BOT had to align its interest rates with those of the United States and actively intervene in foreign exchange markets, buying or selling dollars to manage the baht's value. This limited the central bank's ability to use monetary policy independently to address domestic economic conditions. Furthermore, the peg, combined with Thailand's high interest rates, attracted substantial short-term capital inflows ("hot money"), which began to inflate asset bubbles, particularly in real estate and the stock market.

Beneath the surface of strong macroeconomic indicators, vulnerabilities were accumulating. The large-scale capital inflows led to a rapid expansion of private debt, much of it denominated in US dollars due to lower offshore interest rates, creating a dangerous currency mismatch on private sector balance sheets. While the crisis famously erupted in 1997, the seeds of the subsequent collapse—including an overvalued fixed exchange rate, a fragile financial sector, and excessive external borrowing—were being sown during the boom years of the early 1990s, with the rigid currency regime at the very center of these mounting risks.