The US dollar fell back a bit Wednesday (December 16) morning as analysts believe the Fed is likely to leave its key interest rate at zero. New data on consumer prices show little change after 10 months of increases, suggesting inflation is not a big enough concern at this point to warrant an immediate rise in rates.

The trade off between sparking the economy and keeping inflation under wraps can often force the hand of Central Bank leaders. Fortunately, inflation has not increased to the point that a rise in rates is necessary to combat it. This allows more time for the budding economy to get its legs with lower loan rates and borrowing prices.

The dollar had reached a two month high recently based on growing across the board improvements in economic sectors. Housing starts grew 8.9 per cent according to a report Wednesday morning. Housing numbers have been firm for several months.

Consumer spending and confidence have been steadily improving. Retail sales have climbed the last few months. Unemployment remains the biggest concern for the economy going forward.

The dollar’s strength has produced some surges against currencies and commodities that had been trading perpetually upward for several months, and even years. The Euro has fallen back to just over $1.45 currently, after surpassing $1.50 last week. The Pound sits just above $1.62, well off its 2009 peak over $1.70.

The relentless pursuit of gold has taken a drastic turn of light. After surging to an all time high of $1,218.25 per ounce to start December, the price of gold dropped roughly $100 in just a little over a week. After a slight boost this week, the spot rate of gold is $1,135.60.

The rising dollar also pushed oil prices down to the $70 mark, though this morning’s gains against the dollar in lieu of the expected rate consistency have propped a barrel of oil up toward $73.

While the growing improvement in the economic status in the US has helped stave off further declines in the dollar and produced a sharp near-term bounce. At some point, a higher yielding currency will likely be expected for a reversal of medium to long term trends against the dollar with regard to major currencies and commodities.

Some analysts are already suggesting gold may have finally run its course, especially if there are no more signs that the economy may be facing a double dip recession or worsening conditions in the near future. Perhaps the greenback is on the verge of regaining some respect.