Global recession alarm sounded but one key indicator reveals current situation is better than 2008 financial crisis. Details here

Global recession fears have set in after US President Donald Trump took some bold tariffs decisions. The fall of the mighty US Dollar has also complicated the situation. However, an expert has claimed that the US Dollar was still in better position than the American currency traded during the 2008 financial crisis.

The US currency fell by another two per cent on Friday to hit a three-year low against the euro to $1.14, before paring back some losses. The euros has gained almost 10 per cent against the dollar since Trump returned to the White House on January 20, when the currencies stood near parity at $1.04, AFP reported.

A weaker dollar could drive inflation in the United States by making imports more expensive, squeeze the profit margins of companies and make US markets less attractive to foreign investors, as per the AFP report.


While President Trump froze higher tariffs on scores of countries this week, he allowed a 10 per cent universal duty that went into effect last week in place. At the same time, he escalated a trade war with China, applying a 145 per cent levy on goods from the world's second biggest economy, which retaliated on Friday with a 125 per cent levy on US goods. Some other Trump tariffs have also had staying power, such as sectoral levies on auto imports, steel and aluminium.

JPMorgan Chase research note, released on Monday, stated "Global recession is now our baseline forecast as higher tariffs and retaliatory measures take hold."

US Dollar Holds Key

Amid the volatility in financial markets, investors have turned to other assets such as gold and the Swiss franc, which have soared higher. However, market watchers say it would be too early to say whether the recent decline in the greenback portends any deeper shift. The long-term health of the dollar is an evergreen topic of debate, and the currency has endured earlier moments of doubt.

The movement against the dollar is "a bit of a momentum trade and a bit of an acknowledgement that the tone of US exceptionalism is being peeled back," said Briefing.com analyst Patrick O'Hare. "You have foreign investors who are losing confidence in their US investments because of the policy volatility," O'Hare added.

O'Hare noted that the dollar is still "relatively strong" compared with its trading level at other times, including during the 2008 financial crisis.

Global Financial Crisis of 2008

The biggest financial crisis since the Great Depression was rooted in risky loans to shaky borrowers, which started to lose value after central banks raised interest rates in the period leading up to the crisis. Many companies had taken big positions in highly leveraged mortgage bonds that had proliferated in previous years.

The crisis led to the collapse of some storied Wall Street giants including Bear Stearns and Lehman Brothers, both of whom had large positions in mortgage securities. The debacle also engulfed insurance giant American International Group (AIG.N), opens new tab, which needed a $180 billion bailout. The U.S. government closed Washington Mutual, in what was largest-ever failure of a U.S. bank. The "Great Recession" that resulted was the worst economic downturn in 70 years.

FAQs

Q1. Who is US President?
A1. The President of USA is Donald Trump.

Q2. What is current rate of US Dollar?
A2. The US currency fell by another two per cent on Friday to hit a three-year low against the euro to $1.14, before paring back some losses.