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. Last Updated: 07/27/2016

Greenback's Fortunes Begin to Turn

NEW YORK -- It may be too soon to call the dollar's recent rise a full-fledged turnaround. And there may be some in corporate America who are just fine with that.

After being beaten and battered for the last few years, the greenback appears to be emerging from its funk by making significant gains in recent months against the currencies of major trading partners.

That is surely a positive development if you consider what it could do for the U.S. economy, and how it would cut travel costs for anyone venturing abroad.

But is this good news all around? It may depend who you ask.

There were not expectations for this kind of turn in the dollar this year. The U.S. currency had been stuck in a downward slide.

It's most recent sell-off began last May and extended through the end of last year, with the greenback losing about 12 percent of its value against a trade-weighted basket of other currencies, according to the Federal Reserve.

That is why its recent moves have been so surprising. The dollar has surged about 8 percent this year against the euro and is now trading near a seven-month high.

Many things are feeding this bounce. The U.S. economic climate looks better to investors than that which is going on elsewhere in the world. Job growth appears to be healthy, as does consumer spending. The economy is accelerating at an acceptable pace.

Also fueling the dollar's climb is the Fed's raising of interest rates eight times since last June, which make short-term dollar-denominated investments more attractive, and speculation that China will take its time in delinking its currency from the dollar, despite pressures from the United States.

"There has been this sort of parachute for the dollar seen recently," said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Connecticut. "And that has largely been coming from the compelling economic story that we have here."

Should the dollar continue its upward climb, it could knock down oil prices and the cost of other imported goods. And that could keep inflationary pressures in check because domestic producers would have less need to raise prices to maintain their competitive position in the marketplace, said Wells Fargo senior economist Scott Anderson.

But the big unknown is whether this trend in the dollar has staying power. The way Gilmore explains it, the recent about-face in the dollar's direction signifies that sentiment in the market is "less bearish as opposed to bullish."

By that he means there still are major obstacles standing in the way of a long-term dollar rally. Topping that list: the super-sized U.S. trade and current account deficits, which could eventually scare off foreigners who think investing here would be too risky. While no one expects a foreign exodus to happen, it still would be troubling if the huge deficits spur some investors to look elsewhere to put their money.

Still, not everyone would complain if the dollar reversed its current course. Weakness in the dollar has aided U.S. exporters. It is also important to note that while a strong dollar has historically helped stocks by driving up foreign demand, that has not been the case in recent years.