1 jan 1997 ano - 1997 Asian financial crisis
Descrição:
1997 Asian financial crisis
1. Thai baht was artificially too strong compared to economic fundamental. We had bubble burst in stock and real estate markets and high external debts with economic slowdown and capital outflow
2. But bank of thailand (BOT) kept Baht pegged to dollar under the fixed exchange rate regime. whenever the Baht is too weak, it will sell dollar reserve and buy baht so baht value remained stable at 25 baht per dollar.
3. Soros knows this situation couldn't sustain as cuurency value didn't match economic situation.
4. Soros borrow, say, 25 million baht and convert to 1 million dollar at fixed exchange rate. (25 baht per dollar)
5. BOT kept selling dollar to soros until it empty dollar reserve, meaning it can't intervene in FX market to keep baht value fixed anymore
6. So, it had to let go fixed exchange rate regime and let the Baht value float according to demand and supply.
7. Baht weakened to 50 baht per dollar as nobody wanted baht
8. Soros sold 0.5 million dollar for 25 million baht and repay Baht loan. He kept another 0.5 million dollar for himself.
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