And despite nervous talk, a weakening dollar is not always a bad thing: The slipping currency underscores heightened investor confidence as the economy rebounds, after panicked investors sought a safe haven in the greenback at the height of the recession, economists said. A cheap dollar is also good for US exports.

Ben Carliner, director of research at the Washington, D.C.-based Economic Strategy Institute, said the dollar has adjusted against the euro, yen and other floating currencies.

"We are unlikely to see significant further falls in the value of the dollar against the euro and yen," he said.

A major factor driving down the dollar is the "carry trade," which occurs when investors borrow low-interest rate currencies and invest them in other assets.

And while weakening the greenback, the practice is fueling the rise of equity markets in places like India, Brazil and Russia, Carliner noted.

"Basically, because US interest rates are so low, investors are borrowing in dollars and then converting these dollars into Brazilian reais or Russian rubles and investing in higher yielding assets in these countries," he said.

Brazil has already taken steps to discourage short-term speculative inflows to its financial markets, because leaders there are fretting over the formation of domestic bubbles, a rising real, and the possibility of a jarring reversal of those flows, he said.

Other emerging markets will likely consider similar steps if their currencies continue appreciating against the dollar because of the carry trade, he said.

For the United States, the dollar exchange rate will become an increasingly important measure of monetary policy as the Fed tries to withdraw some of its monetary stimulus as the economy improves, Carliner said.

Indeed, US Federal Reserve Chairman Ben Bernanke recently made an unusual public defense of a strong dollar, he noted.

"(That) shows that the Fed is increasingly taking the value of the dollar into account as it sets monetary policy," he said.

Whether it continues to slide or not, economists said the dollar is highly unlikely to be replaced as the world's currency of choice, as the United States represents nearly a quarter of the world's economy and so many countries hold dollars that no central bank would allow it to depreciate to the point of losing status.

Still, it is true that no one possesses a crystal ball that can predict every movement the dollar makes.

"No one knows for sure which way the dollar will go," Elliott said. "If people knew, they would already be trading on that basis."

(Xinhua News Agency December 5, 2009)