Ahead of the Fed’s interest rate decision later Wednesday, and just one week after the dollar hit its lowest level for 10 months, forex markets and currency analysts are now talking about whether the US currency is reaching a turning point. The change of sentiment was largely triggered by last week’s upbeat US payrolls report, which saw far fewer job losses in July than expected. This strengthened the view that the US is past the worst of its recession and that its economic recovery could precede that of Europe and Japan. Buoyed by such views, the dollar last Friday gained more than 2 per cent against the yen and more than 1 per cent against the euro and the pound. The currency’s climb - continuing more or less this week - comes as analysts of various descriptions are converging on the view that the US economy has responded positively to the massive US fiscal and monetary stimulus, thus reducing the risk premium for holding US assets. The Fed’s introduction of quantitative easing in March has let the dollar’s performance “diverge from the guidance of real interest rate differentials,” Hans Reddeker, of BNP Paribas. “Now, as the economic outlook has stabilised, the relative yield and interest rate differentials should regain their impact on currency markets.” Others, however, are hesitant to call an end to the trend of dollar weakness, given that the currency’s rebound has been based on its reaction to a single piece of economic data, quoting Neil Mellor at Bank of New York Mellon saying, “if there is a shift, it’s at a very embryonic stage”