Therefore, the price must be floating, and the exchange rate is the change mode dominated by market supply and demand.

If an economy is not very strong and its domestic currency is not an international currency, it will be vulnerable to great economic shocks, especially hot money, after the floating exchange rate system is implemented.

The Chiang Mai Agreement came into being because of the lessons of Thailand. The general content is that 65,438+03 countries in East Asia have established a foreign exchange support network. When a country is hit by external forces, other countries give timely support to foreign exchange reserves, and now the total amount has reached 80 billion US dollars.

The floating exchange rate was not based on the US dollar, because the Thai government could only choose the floating exchange rate at that time, because the Thai baht was not an international currency. Therefore, if the Thai government wants to regulate the Thai baht exchange rate, it has to use foreign exchange reserves to regulate transactions in the international market. However, at that time, Thailand had no foreign exchange reserves and could not control the Thai-Zhu exchange rate, so it had to change to a floating exchange rate, that is, the exchange rate of its own currency was determined by the supply and demand of its own currency in the market. Thailand's financial system as a whole is relatively fragile, so Ross took the opportunity to sell in large quantities at that time, and banks in Thailand also owed a lot of foreign debts at that time. In order to pay off debts, financial institutions also sold a lot of Thai baht and exchanged it for dollars to pay off debts, further accelerating the collapse of Thai baht.