Twelve months ago, the worry about the US dollar was that it was "too strong" - complicating life for US manufacturers hoping to export their products overseas.
Now, after several months of sustained declines, a different worry is popping up: that the dollar could plunge too far.
The falling currency could affect everything from Americans' ability to vacation in Paris to more basic concerns such as inflation and interest rates at home.
Last week, the dollar hit new lows against the euro. It set a three-year low against the Japanese yen. Few experts see the slide, in itself, as worrisome. The danger would be if it gathers momentum.
"The odds of a hard landing in the dollar are rising," notes Stephen Roach, chief economist of Morgan Stanley, a New York investment bank.
One driving factor is the magnitude of US debts - and the reliance on foreign money to finance them.
If foreign investors become less eager to hold dollars, the US Treasury could face pressure to pay higher interest rates on US debt, for example. Those foreign investors, having lost billions on paper this year, appear edgy about holding US stocks, bonds, and business properties. In September, the inflows into dollar-based assets totaled only $4.2 billion. That's far short of the $64 billion average monthly inflow in the first eight months of the year.
To many experts, some decline in the dollar is warranted. The greenback has declined about 10 percent this year, by one broad index. This drop has started to encourage American exports. And, by pushing up the cost of imports, it may prompt some narrowing of the US trade deficit, which stands at a record level.
The deficit in trade and other international payments, known as the current account, is running at $555 billion. That amounts to 5.1 percent of the nation's total economic output - a level many economists believe can trigger an international payments crisis.
The debate now is whether such a crisis could happen. Federal Reserve Chairman Alan Greenspan last week talked of a higher probability of a "benign resolution to the US current account imbalance."
The US has low interest rates, low inflation, and excess capacity in industry. That may help the economy sustain some dollar-related upward pressure on interest rates and prices. "This is the optimal time to achieve the inevitable dollar correction," says C. Fred Bergsten, president of the Institute for International Economics in Washington.
What concerns economists is that a sharp shift in sentiment among foreign investors and foreign central bankers could produce a sudden outflow of money from the US. "Were that to happen, it would be a catastrophe," says Criton Zoakos, president of Leto Research, a financial research firm in Leesburg, Va.
As he sees it, inflation and interest rates would rise in the US. Even worse, Japan would return to a recession and Europe would fall into the economic dumps, causing some political turbulence. China's exports would slump, forcing millions of Chinese to return to their farms.
So far, though, most economists seem to be counting on a further slow decline in the dollar against other currencies. For ordinary Americans, that makes trips abroad and imports more expensive.
Some even think the dollar could rise, as foreign investors see the US economic recovery outshining the performance of other nations. Buying euros or yen is "a sucker's bet. Buy dollars," writes Lawrence Kudlow, a Wall Street economist.
Explanations for the weaker dollar vary. The standard view is that it's part of a natural pullback resulting from the record current-account deficits - which mean the US requires more than $2 billion every working day in financing from abroad.
Others see strong geopolitical influences. Mr. Zoakos speaks of a "growing political uncertainty" abroad with rising terrorist attacks and with President Bush shifting gears on Iraq. On Nov. 9 he spoke of the need to bring democracy to the Middle East, a policy implying a 20-to 30-year engagement in fighting terrorism and a long occupation of Iraq - "akin to the cold war." More recently, he agreed to a swift turnover of power to Iraqis by next year.
"A lot of people think the US is biting off more than it can chew," says Zoakos. "That is hitting the dollar ... more than any commercial issue."
Despite that assessment, Zoakos does not expect a rapid decline in the dollar. One reason is that foreign investors in the US have generally been getting a 12 percent return on their capital versus 3 to 4 percent in Europe and near zero in Japan. As a result, net inflows of foreign capital in the US have exceeded the trade deficit - by $176 billion up to September this year, by $71 billion in the same period last year.
Another factor is a shift in White House policy. Under former President Clinton, Treasury secretaries presented undeviating support for a "strong dollar."
Under President Bush, the dollar policy in Washington has been less clear.
One reason was probably that the administration was coming under strong pressure from manufacturers and other industries to weaken the dollar in order to ease exports and shrink import competition. Bush political adviser Karl Rove wanted to woo voters in states such as Michigan and Ohio with protectionist measures and a weaker dollar, says Zoakos.
Bush administration officials knew they had to deal with the huge and growing trade deficit, notes Jim O'Neill, head of global research in London for Goldman Sachs, a major investment house.
So far, the dollar has retraced about a third of its rise in value since 1995. Goldman Sachs figures the dollar needs to fall another 20 percent to restore the trade imbalance to a sustainable level.
The administration's record on the dollar is "pretty good," Mr. O'Neill says.