With the dollar falling this week to 14-year lows against the Japanese yen, many questioned whether the greenback would continue to drop.

But the dollar rebounded strongly Friday on news that unemployment rates were declining, prompting questions of whether the rebound will rise even higher.

On Friday, the dollar traded at 90.7 yen, up sharply from Tuesday, when the yen traded at lower than 87 yen against the dollar -- the lowest point since July 1995. Friday saw the dollar gaining against the euro and other currencies as well.

According to a recent Bloomberg survey, the median prediction among 43 strategists showed that the US currency may gain against the euro, yen, Swiss franc, British pound and Swedish krona by September 30, 2010.

The same survey, however, indicated that the top forecasters among those polled predicted the greenback will continue to weaken, even if the Fed begins to raise interest rates, although officials said that is some time away.

Douglas Elliott, a fellow at the Washington, D.C.-based Brookings Institution, said the question to ask is whether the dollar is balanced where it is.

"It's hard to get the balance right," he said.

And while the United States stands to benefit from a modestly lower dollar -- a sharp decline would be harmful -- it is unclear whether the US currency will rise or fall.

Indeed, investors could bid the currency in either direction.

"Markets have a tendency to overshoot both up and down," he said. "And the problem is that markets often move in jagged ways."

Chad Stone, chief economist at the Washington, D.C.-based Center on Budget and Policy Priorities, said the dollar's fall is a negative development only if it occurs sharply, rather than gradually.

"What you want is a gradual adjustment, but if that turns into a flight from the dollar, that's a different world," he said.

While many fret that the rising deficit will push the dollar to harmful lows, it is more important to cast those fears aside for now and focus on revving up the economy. Paying off the debt can wait until later, he said.

Still, a long-term failure to get the deficit under control could spell trouble for the dollar down the road, he added.

Nevertheless, a continued dollar decline is not written in stone, as an economy's strength and interest rates also play a role in determining a currency's value.

The dollar could begin to move back up in 2010 if the US economic rebound sees solid gains in gross domestic product, analysts said. A rise in interest rates and Congressional moves to cut the deficit could also stem the dollar's downward trajectory.