In an article in this column last November, I argued that a strengthening dollar would be a major story in 2008. The three reasons for the expected turnaround were: a declining deficit in the current account of the balance of payments; the dollar’s undervalued status; and the possibility of a coordinated intervention by the major governments, led by the United States.

Even though there has been no overt official intervention to influence exchange rates, the first two factors have been powerful enough to initiate the move towards a stronger dollar.