Societe Generale: A mild recession in the U.S. could weaken the dollar

Kit Juckes, strategist at Socie ́ te ́ Ge ́ ne ́ rale, pointed out that the US economy was at risk of falling into a mild recession, which could trigger deeper interest rate cuts and lead to a weaker dollar. He said that slowing growth and high valuations in US stocks could lead to a repeat of the mild recession of 2001. Looking back at history, the Federal Reserve slashed interest rates from 6.5 per cent to 1.0 per cent in 2001-2003, while the dollar index plunged 40 per cent in the following seven years. "If concerns about inflation, growth, asset valuations and market bubbles eventually overwhelm the balance and push the economy into a [still mild] recession, both interest rates and the dollar could fall more than we expect," Mr. Juckes warned.