Dollar under pressure

RGE Monitor

# Duy: The Fed and Treasury are setting the stage for a disorderly adjustment of the Dollar by ignoring the external imbalance. Without external adjustment in place, pushing rates to zero, flooding the economy with money, and pumping out hundreds of billions of new debt threatens to pull the rug out from under the Dollar. Even more worrisome, however, is that surplus nations respond with competitive depreciations
# FT: A full scale panic out of the dollar would indicate the outside world believes the policy of quantitative easing will fail. On the other hand, if the Fed's policy actions work, Bernanke will be forced to normalize rates to prevent excess inflation - and in the process will inflect massive losses on those buying Treasuries at 2.25%
# Setser: There is a real risk that the adjustment (of global imbalances) won't be gradual
# Bergsten: A renewed fall of the dollar could deepen the housing crisis and economic weakening. Rate cuts would exacerbate dollar weakness. It may be necessary to consider currency intervention in the strategy for responding to the crisis
# BNY: USD policy over the past eight years to 2Q08 could best be characterized as "benign neglect". It seems possible that the appointment of the new Treasury Secretary under Obama could see the revival of the "strong USD" mantra. Given the nation's huge funding needs in the years ahead, a stable to gently rising USD would help keep attracting in much needed capital from abroad (China and Saudi Arabia would likely be happy with this outcome)
# UniCredit: Though a falling dollar risks rising inflation, asset bubbles and loss of macroeconomic control in dollar peg countries, dollar pegs are likely to continue anyway
# PIMCO: Current account deficit will continue to put downward pressure on USD

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