Rewind to late 2004. Currency forecasters were having a field day with doom and gloom scenarios for the deteriorating U.S. greenback. Asian central banks were buying massive amounts of U.S. Treasuries and market watchers warned that a financial house of cards was in jeopardy. The evils of the “twin deficits” (trade and budget) would continue to erode the value of the U.S. dollar, they warned.

As soon as revelers rang in the new year, however, a very different picture began to emerge. Since the opening bell of 2005, U.S. dollar bulls have reasserted control of the market. From a multi year peak vs. the Euro at $1.36 in December 2004, dollar bulls propelled the greenback higher during the first six months of the year, to a low, around $1.18 in early July.

Whether the buck’s surprising strength persists for the remainder of the year hinges upon several economic factors in the U.S. and abroad.