Investors should expect the currency to rally in the coming months.

The dollar/euro rate has surged from a low of around 1.25 in early 2009 to over 1.50 today, almost regaining its 2008 peak and renewing speculation that the dollar is facing sustained devaluation. While this cannot be ruled out, and the dollar faces formidable short-term pressure, there are good reasons to expect a rally over the next six to nine months. Investors who continue to short the currency in 2010 face considerable risk.

Dollar cycle. The current round of dollar weakness follows a strong rally during the peak of the financial storm, in a well-rehearsed pattern of dollar cycles:

--The rally under former President Ronald Reagan from 1980 took the dollar up by as much as 40-60% (based on a weighted index that varies according to the currency basket used) before the Plaza Accord punctured the bubble in 1985-86.

--The "strong dollar" rally under former Treasury Secretary Robert Rubin (the "Rubin rally") of 25-30% from the late 1990s up to 2002 came amid optimism over a strong U.S. growth outlook.

The dollar cannot be seen as a one-way bet. Indeed its latest rally took it from 1.60 dollar/euro in mid-2008 to 1.25 in early 2009.

The euro. The euro is not a driver of the dollar. On the contrary, dollar sentiment drives the euro as European bonds are the main alternative to holdings in the liquid U.S. bond market. The euro is rising on dollar flight, moving rapidly from around 1.25 in the crisis period of early 2009 to its present rate of 1.50. Its latest surge, and the threat of rising ECB interest rates, is problematic as the E.U. economy is still struggling to emerge from the global recession, with world trade down some 20% from peak.

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As more nervousness creeps into the US stock market, investors are sharpening their look at overseas opportunities where growth is outpacing the US recovery.

While emerging and developed markets have largely kept pace with the US rally over the past seven months, there's growing belief that the two may diverge as the US faces an extended slow-growth period.

Consequently, advisors are making sure their clients are committing at least 20 percent of their portfolios to foreign markets, with about a quarter of that devoted to emerging markets.

"We think international should be a material component in portfolios. It's important for diversification," says Beth Larson, principal at Evermay Wealth Management in Washington, D.C. "It probably should be a larger component than many individual clients think it should be."

Investors looking for foreign exposure are turning to the swelling numbers of exchange-traded funds dedicated to those markets.

The funds are divided into several categories and allow investing in foreign markets as a whole, specific countries within the group, and particular sector plays that are focused on international markets. Emerging markets—China, India, Brazil and a slew of others—make up a significant and increasingly popular component within the foreign market group.

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WASHINGTON (AP) -- As the prospect of double-digit unemployment looms, President Barack Obama on Monday sought to set expectations for the nation, saying job losses will likely roll on "for weeks and months to come" because hiring always lags behind in an economic rebound.

"We just are not where we need to be yet," Obama said as he met with a panel of economic advisers. "We've got a long way to go."

Unemployment hit a 26-year high of 9.8 percent in September. The next monthly reports come out Friday and could show it topping 10 percent.

Still, the economy is growing again. Reports out Monday show improvement in manufacturing, construction and contracts to buy homes.

Obama said that building a sustainable economy and getting people back to work remain his "administration's overriding focus." Obama helped push through a $787 billion economic stimulus package earlier this year, and he says the administration, Congress and the private sector must take more bold steps to help.

Obama spoke as he met with his Economic Recovery Advisory Board. The session was open to reporters and streamed live on the White House Web site.

Obama added that the U.S. must break out of a "debilitating gridlock on trade policy," by ending the false choice between a wide-open, freewheeling import policy or fearful, protectionist approach to trade. He called for a more balanced policy of letting the world know America will compete and trade fairly.

White House: http://www.whitehouse.gov