It is May, and traditionally in the May through



August period, there is a correction in the

currencies which have been strong during the

winter and spring months. This is the time of

year when the declining currencies often get a

chance to rally and collect themselves before the

Autumn season when renewed seriousness grips

international currency traders, and the weak

currencies usually begin to decline again.

If the US dollar is going to rally, it should

have begun to do so and its window of opportunity

is shrinking with each passing day. The answer to

the question is probably that many currency

traders believe that the U.S. fundamentals are

not going to improve on a broad basis and

additionally, the U.S. is not raising interest

rates, while many other countries are signaling

upcoming interest rate increases.

This is because the economies of almost all

developed countries, and all of the rapidly

developing countries are growing much faster than

the U.S. economy. With slow economic growth comes

decreased demand for money. With slower economic

growth, money leaves U.S. investments and moves

to foreign shores to obtain better returns in

foreign stocks, bonds, currencies and commodities.

If the dollar is to rally it should do so soon.

The U.S. will be helped by a weaker dollar and

exports will rise, the big question is, will

imports stop rising so fast? If the U.S.

consumers slow down their spending spree, and if

the U.S. slows down the Iraq war spending, then

the dollar can put on an extensive rally. Until

then, any rallies in the U.S. dollar are likely

to be short [for a few weeks] and not very sweet.

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