Asian Financial Crisis

AAA

DEFINITION of 'Asian Financial Crisis'

Also called the "Asian Contagion", this was a series of currency devaluations and other events that spread through many Asian markets beginning in the summer of 1997. The currency markets first failed in Thailand as the result of the government's decision to no longer peg the local currency to the U.S. dollar. Currency declines spread rapidly throughout South Asia, in turn causing stock market declines, reduced import revenues and even government upheaval.

The Asian Financial Crisis was stemmed somewhat by financial intervention from the International Monetary Fund and the World Bank. However, market declines were also felt in the United States, Europe and Russia as the Asian economies slumped.

INVESTOPEDIA EXPLAINS 'Asian Financial Crisis'

As a result of the crisis, many nations adopted protectionist measures to ensure the stability of their own currency. Often this led to heavy buying of U.S. Treasuries, which are used as a global investment by most of the world's sovereignties.

The Asian crisis led to some needed financial and government reforms in countries like Thailand, South Korea, Japan and Indonesia. It also serves as a valuable case study for economists who try to understand the interwoven markets of today, especially as it relates to currency trading and national accounts management.

RELATED TERMS
  1. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  2. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock ...
  3. Country Risk

    A collection of risks associated with investing in a foreign ...
  4. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. ...
  5. Foreign Currency Effects

    The gain or loss on foreign investments due to changes in the ...
  6. Forex - FX

    The market in which currencies are traded. The forex market is ...
Related Articles
  1. Forex Fundamentals

    What Causes A Currency Crisis?

    Find out what can cause a currency to collapse, and what central banks can do to help.
  2. Forex Education

    George Soros: The Philosophy Of An Elite Investor

    George Soros spent decades as one of the world's elite investors, and even he didn't always come out on top. But when he did, it was spectacular.
  3. Forex Education

    Top 7 Questions About Currency Trading Answered

    Whether you're puzzled by pips or curious about carry trades, your queries are answered here.
  4. Insurance

    Riding The Market Bubble: Don't Try This At Home

    Riding the bubble takes timing, a clear understanding of the market and, most of all, a lot of luck.
  5. Charts & Patterns

    What is a common strategy traders implement when using the Elder-Ray Index?

    Read about the important buying and selling conditions that are recommended by Dr. Alexander Elder when using his Elder-Ray index.
  6. Trading Strategies

    How can a trader profit from a Dead Cat Bounce pattern?

    Profit from the dead cat bounce chart pattern by using the small, short-lived move upward to initiate a low-risk short position in the market.
  7. Trading Strategies

    How do traders identify descending triangle patterns?

    Learn how to identify a descending triangle pattern on a security or index's price chart, and discover why traders consider them to be bearish indicators.
  8. Technical Indicators

    How are descending tops interpreted by traders and technical analysts?

    Find out how technical analysts and traders identify and interpret a descending tops pattern and why this pattern is viewed as a bearish indicator.
  9. Technical Indicators

    What does it mean when an index or stock exhibits a death cross?

    Find out what it means when an index, stock or exchange exhibits a death cross pattern between its short-term and long-term moving averages.
  10. Economics

    The New Global Banking Regulations To Avert Future Crisis

    These are the types of policies that are being developed to minimize the risks posed to the global financial system by banks which are too big to fail.

You May Also Like

Hot Definitions
  1. Christmas Tree

    An options trading strategy that is generally achieved by purchasing one call option and selling two other call options at ...
  2. Christmas Club

    A short-term savings account that usually pays out the full account balance to its account holders once each year, right ...
  3. Boston Snow Indicator

    A market theory that states that a white Christmas in Boston will result in rising stock prices for the following year. For ...
  4. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
  5. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  6. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
Trading Center