Key Takeaways
- A sharp fall in the US dollar could trigger a global recession, warns the Bank for International Settlements (BIS).
- The dollar’s dominant global role means a major depreciation would tighten financial conditions worldwide.
- Risks include currency market turmoil, spiking borrowing costs, and capital flight from emerging markets.
A sharp fall in the US dollar could trigger a global recession, according to a shock report by the Bank for International Settlements (BIS). The central bank for central banks warns that a sudden dollar depreciation could lead to a sharp tightening of global financial conditions.
Why a Dollar Crash Matters
The report highlights the dollar’s dominant role in global trade and finance. Any major move can have widespread repercussions. A large dollar fall could cause:
- Turmoil in currency markets.
- Spiking borrowing costs worldwide.
- Capital flight from emerging markets.
Global Recession Risk
This scenario could potentially derail the global economy, pushing it into a recession. The BIS urged policymakers to be vigilant and prepared. It emphasized the need for robust financial buffers and prudent economic management to weather such a shock.
