The buck doesn't stop here; it just keeps falling

He doesn't see the dollar as undervalued. He sees it as having being overpriced in the 1990s--and what's happened since as something along the lines of a correction.

Still, Vargo acknowledges the dollar's decline has brought a measure of pain to some consumers. "As the dollar has gone down in value, that has added to the dollar cost of oil. No question. So having the dollar decline is not unambiguously a plus. That's why we say there's got to be a balance there somewhere. What we want is a Goldilocks dollar. Not too strong, not too weak. But just right. And only the market can determine that," Vargo said.

Mark Zandi, chief economist at Moody's Economy.com, said expanding exports due to a weak dollar are "an important source of growth, but it doesn't add a lot to jobs, it doesn't mean very much for the average American household. For the average American, for the average consumer, these are pretty tough times."

The loss of the dollar's purchasing power and international respect has some experts worrying that the euro might one day replace the dollar as the so-called primary reserve currency. And that could trigger a dollar rout as foreign governments and international investors flee from U.S. Treasury bonds and other dollar-denominated investments.

Making matters worse: The gaping U.S. current-account deficit--the amount by which the value of goods, services and investments bought in the U.S. from overseas exceeds the amount the U.S. sells abroad--and the low levels of domestic savings means that foreigners must purchase more than $3 billion every business day to fund the imbalance.

Since roughly half of the nation's nearly $10 trillion national debt is held by foreigners, mostly in Treasury bills and bonds, such a withdrawal could have enormous consequences.

Yet Washington finds its options limited.

President Bush asserts longtime support for a "strong" dollar, and made that point again Sunday in a news conference in Japan with Prime Minister Yasuo Fukuda. "In terms of the dollar, the United States strongly believes--believes in a strong dollar policy and believes that the strength of our economy will be reflected in the dollar."

But not once in his presidency has the U.S bought dollars on foreign exchange markets--called intervention--to help prop up the greenback. There's no telling where the buck will stop these days, although for the past few weeks it seems to be in a holding pattern. Even as three Bush Treasury secretaries in a row spouted the strong-dollar mantra, the dollar kept tumbling against the euro, the pound, the yen, the Canadian dollar and most other major currencies.

The Federal Reserve could prop up the dollar by increasing interest rates under its control. Increased yields would make dollar-denominated investments more attractive to foreigners. But that could undercut the already anemic economic growth in a frail U.S. economy rocked by soaring fuel costs, falling home prices and rising unemployment--and the lowest reading of consumer confidence in 16 years.