Shhh! The Dollar Is Rising

This seems to be flying under the radar, but the dollar is making a comeback against the Euro and other currencies.

A gloomy outlook for the euro-zone economy continued to cast a shadow over the euro Thursday, allowing the U.S. dollar to extend gains after nearing a one-year high against the single currency overnight, analysts said.

The euro broke through the psychologically and technically important $1.40 level versus the dollar late Wednesday. It recently traded at $1.3938, down from $1.3963 in late North American trade Wednesday, plumbing levels unseen since September 2007.

Continued weakness in the oil markets, despite the announcement of a production cut by OPEC earlier this week and a decline in U.S. oil inventories Wednesday, also underpinned the dollar.

As the demand for oil drops in the U.S. and the corresponding weakness in the oil price continues to be seen in the market, the dollar is gaining strength. Also clearly related to this is the dropping fear of inflation in the U.S. (due in a large part to the actions recently taken by the Federal Reserve Bank and the Treasury) plus the 3.3% growth rate in the second quarter, while the overseas economies continue to struggle and see little or no growth.

We are not out of the woods yet by any means, but we just might be getting a glimpse of a clearing up ahead.