What made dollar so strong?

Commodities' Response to a Global slowdown:

• OECD and IMF both downgraded their estimate for the global economic growth in their latest reports.
• Italian GDP unexpectedly shrank 0.3 percent in the second quarter and GDP estimate for UK revised down suggesting that the economy is increasingly losing steam in Europe.
• The story is similar in other continents; Singapore revised its growth forecast down and officials in Japan warned that the world's second largest economy might have already contracted.
• It is when tightening monetary policy incorporated by central bankers in India and China make the prospect for growth even more gloomy.

Hence the recent sharp decline in prices of commodities, lead by oil, could reflect the fear that such slowdown could eventually take its toll on the global demand.

Monetary policy around the globe:

• Euro and sterling dropped in the week that policymakers decided to keep interest rates unchanged. However recent decline in commodities' prices, which has been the main source of uncertainty about inflation, strengthened this expectation that they can finally turn their eyes toward economic growth by cutting borrowing costs. Australia and New Zealand are also facing similar condition.

Mergers and Acquisitions:

• According to an article in FT, it seems that the U.S. has been increasingly a target for M&A which could fundamentally support the currency.

The possible risks to this situation:
Every source of strength could work in the other direction, usually by different reasons. Oil price could rise again especially in response to rising geopolitical tensions. In the other hand, the direction for monetary policy could change, in U.S or elsewhere, simply in reaction to a higher than expected jump (or fall) in inflation or unemployment which looks very probable especially in the U.S. remembering Friday's unexpected job lost in Canada.