Dollar fall will continue

GLOBAL CAPITAL REALLOCATION will be a central theme in the foreign exchange markets for many quarters to come, at times eclipsing the fundamentals driving relative economic growth. That means a lower dollar, and big changes for some other currencies.

For some time, fundamental analysts have been writing about long-term themes such as capital flows and current account imbalances that would eventually move the big three currencies a great deal when markets finally noticed them. They have now.

Growth forecasts remain central to forex forecasts and capital allocation but the focus has shifted towards how fast countries are growing relative to their potential. And over the next year, this will be acutely relevant for the US.

For the US economy, after several false starts, it is finally safe to say that recovery is here for real. Growth in the third quarter was extraordinary, and probably unsustainable, as tax cuts...