What’s a trader to do?

“When everyone is on one side of the boat, you want to be nimble,” Glassman says. “Be aware the mood could change. Don’t be shocked if the dollar rebounds.”

He sees potential for a rebound in the U.S. dollar back toward the $1.15 area vs. the euro in 2005.

A key factor traders will want to watch in early 2005 is the potential for a Chinese revaluation.

“If the Chinese currency was higher, no one would be complaining about the weak dollar,” says Tom Rogers, senior currency analyst at Thomson Financial. He speculates a Chinese revaluation could relieve the upward pressure on the euro.

“We could see a huge sell-Europe, buy-Asia trade,” he says.