All the talk about U.S. current account deficits hurting the dollar has vanished from the markets.

Those countries with large current account deficits, such as the U.S. and Australia, haven't been penalized by seeing their currencies drop. In other words, financial markets currently are ignoring current account balances, but that's not to say that will continue.

A widening U.S. current-account is always unfavorable for the dollar. That won't be a big issue while the U.S. receives actual capital flows. But investors are always worrying about potential sudden shifts. The dollar looks weak.

There are several silver linings on the horizon. The current account deficits in Spain and Portugal are declining because they have become more competitive and they're exporting more.

I believe that the current dollar adjustment is cyclical.

Just like a pendulum, ... the current-account theme is back in the market.