US Dollar's Sharp Fall Could Trigger Global Recession Shock: BofA Report

• A significant and sustained depreciation of the US dollar against major currencies could lead to a recessionary shock for the global economy outside the United States, warns a BofA Securities report.
• A weaker dollar would likely slow global growth, creating deflationary pressures and prompting other countries to ease monetary policy, which would then limit the dollar's fall.
• The report emphasizes that a disorderly fall of the dollar is not beneficial for any economy, as global financial stability depends on orderly currency movements.
• Recent trends show the dollar weakening despite stable US interest rates (4.00-4.50%) and rising stock markets, suggesting a decoupling from its traditional safe-haven role.
• While some further depreciation is possible, the report concludes that a substantial real decline in the dollar would be detrimental to the global economy, despite the US's strong growth fundamentals.