From Nadler on Kitco:

Marketwatch's Lisa Twaronite investigates the dollar, the euro, and reports that it may be the dawn of a new era indeed - just not the kind conventional wisdom had expected.

Investors watching the dollar's dramatic rally at the end of this week could be forgiven for skeptically wondering, is it for real, and is it sustainable? The good news for greenback holders (and anyone mulling that long-postponed European vacation) is that the answer to both questions is affirmative, analysts said.

"Yes, it's for real," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman. "The U.S. multi-year down trend is over. The process we described as 'carving out a bottom' has been completed."

The dollar hit a bottom last November against the British pound sterling and the Canadian dollar, as the U.S. Federal Reserve expanded its lending facilities and the central banks of England and Canada prepared to cut their respective interest rates. It reached its nadir against the Japanese yen and the Swiss franc in March, when the Fed responded to Bear Stearns with an emergency discount rate cut. It has now bottomed out against the euro as well, Chandler said.

"Since reaching an all-time low against the major currencies in mid-March, the U.S. dollar has climbed 6%," wrote Sal Guatieri, economist at BMO Capital Markets, in a note to clients Friday. "The currency has seen several larger, temporary gains during its 38% slide since 2002, but this one could have legs."

It seems like only yesterday - and in fact, it was only July 15 -- that the euro hit a new record high of $1.6036 -- its loftiest level since the single European currency began trading in January 1999. The euro's spike followed news of a possible bailout of U.S. mortgage giants Freddie Mac. But on Friday, Europe's single currency, already under pressure following comments made Thursday by European Central Bank chief Jean-Claude Trichet, sharply extended losses, first in Asian trading and then in European dealings. Then in late North American trading, it broke below the $1.5000 level for the first time since February.

"The euro, looking at a daily chart, looks a lot like a cliff diver. The only difference is that cliff divers eventually hit water," said Dale F. Doelling, chief market technician at Trends In Commodities. "This market has gone into a freefall after breaking its 200-day moving average yesterday and there seems to be no bottom to the euro," he said in emailed comments. The next support level, according to several currencies analysts, is at $1.4920.

Some analysts say the dollar's lackluster performance in July actually belied the strength of dollar fundamentals.

The dollar "suffered staggering body blows in July with the collapse of IndyMac, the third-largest banking failure in U.S. history, and a near-death experience by mortgage giants Fannie Mae and Freddie Mac," David Watt, senior currency strategist at RBC Capital Markets, wrote in a note to clients earlier this week. But while the greenback "wobbled," he said, its resiliency lends support to the view that the dollar did in fact bottom in the first quarter of 2008.