The number eight sustained an arm injury during the Six Nations win over England. At the time, Scotland head coach Gregor Townsend labelled the issue "serious", and assistant coach Peter Horne suggested Dempsey was likely to sit out the remainder of the championship.
Since then, the situation has improved considerably. Dempsey has returned to the training ground in the build-up to next weekend's key Six Nations encounter with France at Murrayfield.
"It's gone well," Smith said, reflecting on the player's recovery.
"I don't know if you've had any news from Scotland, he's obviously now in their books. But he got called into camp yesterday [Thursday], apparently he trained already with them yesterday, so that's good.
"That obviously tested the fitness and I'm quite excited to know that that injury is manageable."
Smith admitted, however, that he could not yet say whether Dempsey would be ready to feature against France.
"I don't know," he said.