I guess it is fair to say that most of us got caught by surprise with the reversal in direction in the dollar since the beginning of December. Dollar bears were citing a ballooning US deficit, remaining toxic waste and weak consumer demand as prime reasons to clobber the dollar. But then, around the beginning of December, something fundamental changed. People began to realize that Europe was not any better, neither fiscally (huge deficits and a growing risk of defaults for certain countries) nor in terms of consumption and the tides began to turn. Further support for the dollar also came in the form of employment statistics that were overall better than what the market was expecting. So there you go, the U.S. economy is not doing as bad as what we were led to believe, on a relative basis of course! I should also point out that emerging markets are not plagued by the deficit problems of developed markets and therefore their currencies should rightfully appreciate against the dollar. This is especially applicable to commodity rich countries such as Australia.
Mind you, these are long term trends that I expect. As everyone knows, the short term is notoriously difficult to forecast, especially regarding currencies that contain a lot of noise.
