THE US dollar is rapidly strengthening against the Japanese yen and is on track to regain recent losses, according to Jardine Fleming Unit Trusts. The company claims that solid economic performance and the expectations of an interest rate cut by the US Federal Reserve bolster their prediction. Now that the European currency market has halted its gyrations, investors will be able to focus their resources on the dollar. But more than anything else, say analysts, the result of ongoing US budget discussions - to be concluded tomorrow - will impact strongly on the American dollar. Hovering on Friday around Y102/US$1, the dollar could be boosted by the arrival of a credible deficit-reduction package. The dollar's recovery is part of the long-term reversal that began in August. The continuing decline in the US trade deficit with Japan, the recovery of the Japanese economy as the US economy slows down, and the improvement in the US budget deficit are all contributing to the dollar's recovery. This was temporarily halted by the European Monetary Union (EMU) crisis in September. Investors headed for the 'safe havens' of the German deutschemark and the Swiss franc after the German finance minister suggested that some major countries - including France, Italy and Belgium - would not be able to meet the criteria for the EMU set by the Maastricht Treaty. The 'doubtful' European Union (EU) member countries have now improved their fiscal positions. Now that the financial mess in the EU is sorted out, analysts expect that macroeconomic factors should be able to work their magic. The continuing decline in the US trade deficit with Japan, the slowdown in the US economy coinciding with the acceleration in the Japanese economy, as well as the improvement in the US budget deficit, all bring hope that the US dollar will rally.