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The beginning of the Asian financial crisis can be traced back to 2 July 1997 That was the day the Thai Government announced a managed float of the Baht and called on the International Monetary Fund IMF for technical assistance That day the Baht fell around 20 per cent against the US This became the trigger for the Asian currency crisis Within the week the Philippines and Malaysian Governments were heavily intervening to defend their currencies While Indonesia intervened and also allowed the currency to move in a widened trading range a sort of a float but with a floor below which the monetary authority acts to defend the currency against further falls By the end of the month there was a currency meltdown during which the Malaysian Prime Minister Mahathir attacked rogue speculators and named the notorious speculator and hedge fund manager George Soros as being personally responsible for the fall in value of the ringgit Soon other East Asian economies became involved Taiwan Hong Kong Singapore and others to varying degrees Stock and property markets were also feeling the pressure though the declines in stock prices tended to show a less volatile but nevertheless downward trend over most of 1997 By 27 October the crisis had had a world wide impact on that day provoking a massive response on Wall Street with the Dow Jones industrial average falling by 55426 or 718 per cent its biggest point fall in history causing stock exchange officials to suspend trading Countries such as Thailand Indonesia Malaysia and the Philippines have embraced an unusual policy combination of liberalisation of controls on flows of financial capital on the one hand and quasi-fixed heavily managed exchange rate systems on the other These exchange rate systems have been operated largely through linkages with the United States US dollar as their anchor 1 Such external policy mixes are only sustainable in the longer term if there is close harmonisation
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