A big drop in the dollar could have a big impact on how stocks and bonds are priced around the world, according to data published by the Bank for International Settlements.
The BIS said on Tuesday that the drop in global equities over the past two weeks, which was driven by the dollar’s slide against the euro, could have had a knock-on effect on global currencies.
It said that, after dropping by about 1% in March, the euro hit a two-month low of $1.2965 per euro, or around 40 cents lower than it had been at the start of March.
That means that a 1% drop in a currency is about 0.5% of global GDP, and could have implications for companies and consumers, said the BIS’s chief economist Paul Slemrod.
The euro has lost about 20% of its value since the start in March.
That means it is about 4% less than it was at the end of last year.
Slemrod said the impact of a drop in dollar strength on global equity prices could be significant, and that the euro’s decline had been driven by investors and banks.
“There is a lot of uncertainty around what is going to happen in the coming months,” he said.
“If the US dollar has lost a bit of its momentum and the euro is down, then that could have been a drag on the dollar.”
I think it is possible that the impact on the euro and other currencies could be quite significant.
“The BES said that the US economy was in a very strong position.
It said the economy grew 3.6% in the third quarter of this year.