It's not only the U.S. dollar that's doing well now, but also the Japanese yen.

Here's an interesting theory as to the reason why.

"The reversal of the yen carry forward trade indicates to us that massive selling by hedge funds is playing a big part in the unprecedented market volatility we are seeing. The only currency that has gone up against the U.S. dollar is the Japanese Yen. Japan has very low interest rates so you can borrow a whole lot of yen, pay a low interest rate, and convert that yen to any currency you want and buy stocks, commodities etc. Most hedge funds use some degree of leverage and when they are forced to liquidate their holdings because they are under water, one of the things they need to do is repay their yen loans, meaning they will have to buy yen. That's why the yen is up and that's why we and almost everyone else thinks that what we are seeing right now is massive hedge fund liquidation and massive buying of yen as they repay their loans."

On this topic I see Japan is a huge owner of foreign debt (up there with China). It seems to me the appreciation of the Yen due to carry-trade unwind could cause a big rise in the relative debt levels of countries like UK & Eurozone (with currencies in -ve mode). Could this contribute to a wave of country bankruptcies ?