Last month the global credit and liquidity turmoil graduated from a crisis to a panic, spilling over into all markets as individual and institutional traders liquidated positions and brought money back home. The U.S. dollar ended up a big winner, though, as several bullish factors perpetuated the rally that had started in July.

For the most part, currency moves in recent weeks have diverged from underlying economic, growth, and interestrate fundamentals, with position squaring being the dominant factor.