Part 3/8:
A critical element of the crisis lay in the breakdown of fixed exchange rate systems that many Asian currencies had maintained against the US dollar. These pegs were fundamentally undermined by rampant speculation, culminating in currency devaluations that could reach as high as 70%. The reverberations of such currency collapses led to widespread bankruptcies, as both corporations and banking institutions that had over-leveraged in foreign currencies found themselves in dire straits.
The underlying causes of this rapid reversal of capital are complex and multi-faceted. Key among them was the exposure of unsound debts in several nations, propelled by ineffective economic policies and currency pegs that belied underlying weaknesses.