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Please find a quick overview below:

• When complete financial market frenzy broke out last autumn there were gains for “safe havens” such as the Swiss franc (CHF), the Japanese yen (JPY) and the US dollar (USD).

• Now the outlook for a continued cautious increase in risk appetite and lower market volatility appears good. In addition, there has been mounting evidence that the global economic downturn is decelerating.

• What happens in the foreign exchange market in such an environment? The currencies that play the role of safe havens should weaken. The current strength of their currencies is hurting growth prospects in Switzerland, Japan and the US, countries that have now all witnessed sizeable GDP declines.

• In addition, their monetary policies are very loose − with key interest rates at or below 0.25 per cent. Their central banks are also launching aggressive quantitative stimulus measures, which usually have a negative impact on currencies.

• Such an environment will probably also lead to a “carry trade”: borrowing in low interest rate currencies and investments in countries with higher interest rates. One consequence will be the creation of capital outflows from low interest rate countries, which will weaken their currencies.

• The US, together with the emerging markets sphere, will most likely lead the imminent (mild) global cyclical recovery. Our basic forecast is that the USD will strengthen somewhat against CHF and JPY during the remainder of 2009.

• Looking further ahead, by all indications a number of smaller currencies will be among the winners. These will include commodity-dominated currencies and emerging market currencies.

Full analysis: Source.