For years, calling the dollar was a matter of second-guessing the appetite for risk. On “risk on” days, when investors felt good, the dollar fell; and when risk was “off” the dollar regained. That dynamic drove its long decline in the past decade, its rally during the credit crisis,

and its sell-off once last year's relief rally gained traction. But the dollar's movement is no longer a direct function of risk. For the past two months, it has gained even as risk appetite has returned. This may show healthy normalisation, but the development carries risks of its own.

Recent macro data have exhumed talk of Goldilocks. Stronger employment and manufacturing data suggest the US is not heading for a second “dip”, while benign inflation data suggest that higher rates can be avoided for a while yet. Even if the Federal Reserve exits sooner rather than later, the dollar bulls argue that would attract short-term funds to the US. And they can even argue that if full-throttle risk aversion comes back, it will benefit from another “flight to quality”.