U.S. Federal Reserve Chairman Alan Greenspan sounded a somewhat optimistic note on economic prospects last week.

In his testimony before the Senate Budget Committee on Jan. 24, Greenspan said there are signs that the "forces restraining" the U.S. economy over the past year are "starting to diminish," with economic activity "beginning to firm."

Indeed, his testimony followed a slew of upbeat economic reports that the U.S. economy could have already hit bottom.

A Labor Department report released earlier said weekly requests for jobless benefits fell for the third straight week in the week to Jan. 19.

A number of other economic statistics have also indicated that economic recovery will soon become evident.

Although business investment is not showing growth, the manufacturing sector has begun working off stockpiles of unsold products, raising hopes that factory operating ratios are set to rise.

As Greenspan indicated, the economy may already be starting to pick up.

With the U.S. economic recovery becoming discernible, a shift into the dollar could soon gather momentum.

Since the days of former President Bill Clinton, Washington has remained committed to a strong dollar policy.

Robert Rubin, the former Treasury secretary, was often quoted as saying that a strong dollar was in the national interest.

Still, an unchecked dollar appreciation is unlikely, though the long-term upward direction in its value remains unchanged.

Japan's neighbors have already expressed dismay at the yen's unilateral fall against other key currencies.

Keeping an eye on these concerns, Japanese government officials are toning down their remarks favoring the yen's depreciation.

They too now appear worried that a further yen fall would trigger a broader "sell Japan" mentality.

The dollar traded at close to 135 yen in Tokyo late last week, a level unseen since October 1998.

Having risen some 15 yen since last fall, the dollar now may be poised to give back some of its recent gains.

In short, the dollar appears likely to fall to around 128 yen in the near term.