The fucking dollar:

OK. We are not printing money as M3 is actually falling. The housing bubble overseas is about to explode. Canada is worse than us; Britain is worse than anywhere; except for Russia and with their defense spending literally out of control look for a real problem. Interest rates are relative so as we drop ours the EU will raise theirs; the Japanese refusal to hike rates have fueled an asset inflation that is about to end and everybody knows it. The Chinese are printing money to buy dollars and are happy as clams with what they are doing since it holds their currency down. We are in a competition with others to keep our currency in order to stimulate exports. China is sitting on a huge horde of dollars that they don't know what to do with which pressures our dollar. The inflation in China is about to break wide open, it has been what has fuled their artificial growth. and then what? The always reliable Minyanville has a detailed set of explanations a sort of a summary

It's certainly hard to be a dollar bull, but most of the reasons given for its weakness do not stand up under scrutiny. This is especially true in relation to the Euro. Everyone hated the Euro a few years back but they all love it now that the dollar is at $1.40+- vs. the Euro. This is classic herding behavior at its finest. Whatever extent the Euro is rising from anti-dollar sentiment as opposed to fundamental reasons will eventually be unwound.

Fundamentally, the Yen should be poised to rise, but interest rate policy is a major factor in the strength or weakness of a currency, and Japan is still sitting close to ZIRP (zero interest rates policy). Japan at some point will be forced by the market to hike rates. Until that happens, a complete collapse of the Yen remains a possibility.

Likewise, on a fundamental basis, the dollar should rise vs. the Euro and fall vs. the Yen, with the net effect being a rise in the US dollar index.

The implications of an unwind of the carry trade, a weakening dollar vs Japan and Asia, and a strengthening dollar elsewhere is likely a nightmare scenario for equities worldwide. It remains to be seen if it plays out that way, and if so, in what timeframe.