By Wanfeng Zhou, Reuters

NEW YORK–The stars are aligning for U.S. dollar bulls. For more than a decade, good times in such markets as stocks and real estate were bad news for the greenback. Investors tended to use the U.S. dollar only as a life jacket when storms raged in risky markets.

Now, though, rather than serving as a hiding place, the dollar is benefiting from the stock market’s surge to new highs and the improvement in U.S. economic data. The dollar nudged down a tad from a seven-month high against a basket of currencies on Thursday even as the Dow Jones Industrial Average surged to another record high despite interest rates remaining at record lows. For instance, the dollar has gained fairly steadily against the yen. In January, it was trading at 86.67 yen to the dollar; on Thursday it was trading at 96.06 to the dollar. Likewise, the British pound has fallen from 1.62 to 1.51 to the dollar so far this year. The moves suggests the dollar has entered a multi-year bull cycle, and marks a major shift in its behavior against other asset classes.

“Certainly, all the pieces are slowly coming into place for a bull market for the dollar,” said Paresh Upadhyaya, director of currency at Pioneer Investments in Boston, which had assets under management of US$204 billion as of the end of last year.

The dollar has outperformed eight out of nine major G-10 currencies so far this year. Political uncertainty in Italy has re-ignited fear about the euro zone’s ongoing debt crisis. Weak economic growth and the prospects of aggressive monetary easing in Japan and Britain have driven the yen and sterling to multi-year lows. To be sure, there are those who caution that spending cuts from Washington could put a damper on economic growth and the Federal Reserve has pledged to keep interest rates low for the foreseeable future.