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. The World Bank

    An international organization dedicated to providing financing, ...
  4. Contagion

    The likelihood that significant economic changes in one country ...
  5. Long-Term Capital Management - ...

    A large hedge fund led by Nobel Prize-winning economists and ...
  6. Country Risk

    A collection of risks associated with investing in a foreign ...
RELATED FAQS
  1. What techniques can be used to hedge exposure to the chemicals sector?

    An investor can hedge exposure to the chemicals sector in two ways. Because the sector is cyclical, an investor can allocate ... Read Full Answer >>
  2. What techniques can be used for hedging exposure to the electronics sector?

    Hedging exposure to the electronics sector offers an investor a way to insulate his portfolio from losses during periods ... Read Full Answer >>
  3. What options strategies are best suited for investing in the banking sector?

    The covered call option strategy allows investors to profit from the banking sector's stability and its track record for ... Read Full Answer >>
  4. How can an investor make money from a decline in the electronics sector?

    Speculation methods, such as short selling, futures contracts and put options, offer investors a way to make money from a ... Read Full Answer >>
  5. What do mortgage lenders use the securitization food chain?

    The phrase "securitization food chain" was made popular by director Chris Ferguson in "Inside Job," a film about the 2007-2 ... Read Full Answer >>
  6. How does the performance of the stock market affect individual businesses?

    The stock market affects individual businesses by influencing consumer spending and providing the chance for stronger returns ... Read Full Answer >>
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. Economics

    Post-Election Opportunities For Nigerian Oil

    Nigeria has an historic opportunity to reform and improve its oil industry now that elections are over.
  6. Trading Strategies

    Rules and Strategies For Profitable Short Selling

    Short sales work well in bull and bear markets but strict entry and risk management rules are required to overcome the threat of short squeezes.
  7. Economics

    Worried About The Fed Hike?

    With the Nasdaq crossing the threshold and the broader equity bull market entering its 7th year, many investors are anxious that stocks are in a bubble.
  8. Stock Analysis

    5 Reasons Sirius XM Haters Are Gone

    Bears continue to clear out of Sirius XM Holdings. There were fewer than 146 million of its shares sold short by the end of February.
  9. Economics

    Could Ukraine's Debt Crisis Destabilize The EU?

    A financial crisis in Ukraine could be a bigger threat to European security than the current financial crisis in Greece.
  10. Investing Basics

    The Dodd-Frank Wall Street Reform Act

    The Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly called Dodd-Frank, was passed in 2010. The goal of the act is to prevent another great recession like that of 2008, which ...

You May Also Like

Hot Definitions
  1. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  2. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  3. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  4. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  5. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  6. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center