All of the same factors in the US that drove the dollar down against other currencies remain in place, yet over the past few weeks we have seen the dollar rally hard against world currencies. An increase of some 12-15%, demonstrates that in the currency world, it is always a game of relativity. This move should outline that for example, a 2% higher short rate in the euro region relative to fed funds can be quickly wiped out (6 times over) by the move in the underlying currencies. So, betting on currencies that pay higher rates is always a dangerous bet in and of itself. The currency world is a circle, and what we have seen in the euro region is an example of how the circle works. Now, persistent wage pressures and inflation have kept the ECB extremely hawkish at a time when the markets are telling them that they need to cut rates, and growth has fallen off the cliff. On the other hand, in the US, the central bank has done everything possible to avert financial disaster, a recession, and a catastrophic problem in the mortgage market by taking over Fannie and Freddie. All of their moves only help at the margin, yet the perception of these moves (previously perceived as inflationary, and hurtful to the value of the dollar) is now that they are very much in front of the curve vs the ECB, who appears very much behind the curve in their thinking and rate moves. With no response from policy makers in the EU, prospects remain bleak as far as investors can see. As growth has become the mantra, the US appears much more poised to come out of this “global recession” first, with the rest of the world lagging severely. This has driven dollar buying beyond anyones expectations as it moves back towards 1.25 to the euro (from a “low” of 1.60). In no other market will investors use the same reasons for selling an asset like crazy, to then turn around and buy it with abandon. The reason for this is that again, the currency world is always a game of relativity, unlike other markets that tend to focus on the fundamentals within. If Americans are forced to raise cash, you could see additional dollar strength as investors repatriate their foreign investments.