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

The market is misreading and misunderstanding the story. The story is the capital account, not, I repeat not, the current account.

We need to see imports soften off if we are ever going to solve the current account deficit problem. That's why we've seen the currency respond to the wider deficit. It's worrying that the current account deficit will stay large.

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.

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.

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