As the global economy strengthens, the dollar weakens

If the euro's rally against the dollar is in its last stage, it's an awfully long stage.

The dollar's recent decline versus the world's other major currencies may strike the typical investor as somewhat of a paradox: the dollar strengthening in a U.S. recession, but weakening amid signs of a U.S. economic recovery. But this is not really a surprise, at least to the trained, professional currency trader.

Why would the dollar weaken just when U.S. investments started to become more attractive? Basic law of supply and demand. Simultaneously, it looks like the global economy is recovering, making international investments -- particularly potentially high-returning investments in Asia and Latin America -- more attractive, as well, luring capital out of the dollar and weakening the buck.