Currency Angst Is Going Global as Strong Dollar Vexes Markets

-- A resurgent US dollar is exasperating central bankers and governments around the world, forcing them into action to relieve the pressure on their own currencies. “Given the current global environment where central banks appear to be looking to end their tightening cycles, there doesn’t seem to be a safe way out from the dollar’s continued dominance.” Just months ago, a recession in the US seemed all but inevitable. “They’re trying to buy time,” Rajeev De Mello, global macro portfolio manager at Gama Asset Management SA, said of central banks and government intervention in currency markets. “If we start having more doubts about rate cuts by the Fed, then there’s no point in intervening — volatility will go up and the intent will be meaningless.” While markets still expect the Fed to ease policy this year, not everyone is convinced even that will bring relief in currency markets. “I think they’ll be more shy about doing that if they’re worried about the currency.” With all the jawboning from global policymakers, “we are seeing acknowledgment from central banks that the Fed cuts are not necessarily going to provide a relief, at least from the currency side of things,” said Michael Cahill, a foreign-exchange analyst at Goldman Sachs Group Inc. Investors are also buying into that new reality, adding to bets on dollar strength in recent weeks.