Year after year, professional analysts at banks and brokers forecast the dollar will fall against the Euro because of the disastrous twin current account and budget deficits. Ho hum.

Year after year, the dollar may fall on a net year-over-year basis, but not (so far) by disastrous amounts. In 2006, the dollar fell 11 percent vs. the euro, but this is not panic selling. In fact, the dollar has been a net gainer against the other major currency, the Japanese yen (only 1.5 percent but a gain is not a loss).

The reason for the dollar’s firmness against the yen is the much-referenced carry trade.