The Euro, Like the Euro-Zone, Remains a Work in Progress

Add on to the above calculations for GDP growth rates in the U.S. and euro-zone, their respective interest rates, sovereign debt as a percent of GDP, and reserve currency status, and one can see the multitude of variables that affect a currency's value. On Thursday at mid-day, the dollar strengthened 1 cent to $1.3628 versus the euro.

One thing investors should not do -- assume that the large U.S. budget deficit guarantees that the dollar will weaken further. That's a simplistic linkage of the very worst sort -- and one that could lose you a considerable sum of money if you start shorting the dollar, or make other investments based on that assumption.

Moreover, its entirely possible that the dollar could rise substantially this year versus the euro, despite the U.S. government's more than $1 trillion in red ink.

Why might it occur? Take an above-trend U.S. GDP growth rate (4%), add solid earnings growth in 2010, and Fortune 500 companies that register impressive international sales gains, plus a Fed interest rate increase in the second half of the year, and the result would be more money flowing into the U.S., and a stronger dollar.

For now, just use this short-hand: the euro remains a work in progress, with its value and trend versus the dollar to be determined, pending the resolution of the Greek budget crisis, the specific details of which have not been determined and/or announced yet.