Despite recent appreciation in the U.S. dollar, analysts don't expect the greenback to hold those gains across the board unless the U.S. economy gets serious about job growth. Without more jobs for constituents, political pressure will remain too strong against higher interest rates. Without higher interest rates, foreign direct investment isn't likely to continue at its current rate, sending the current account deficit and the dollar into a tailspin. If the foreign currency market is a market in interest rate differentials, then the immensely tradable trends that traders have exploited in the dollar in the past year should come as no surprise. With the U.S. fed funds rate hovering at a historically miniscule 1% and rates of other major economies several points higher, the greenback is on the selling side ot an interest rare pricing war. Likewise, what traders hope will be an equally tradable recovery should be spawned primarily by one force: rising U.S. interest rates.
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