The US dollar is weakening for many reasons. Attributing factors include high gas prices and the failing real estate market.
Rising gas prices are causing American consumers to spend less money on extras than averages in the past. This causes major companies to earn less profit, making their stocks look less inviting to foreign and domestic investors. To combat this, the US government has created an economic stimulus package. The goal is that taxpayers will take this incentive check and use the money on a spending spree, thereby jumpstarting the economy. Unfortunately, recent polls have shown that many will use the money to pay bills instead.
The Federal Reserve has been reducing interest rates to help stabilize the real estate market and take some financial pressure off of homeowners in hopes of stalling the mass foreclosures of late. While this does help homeowners, it also deters investing when US interest rates are lower than those of foreign counterparts.
Having a weak dollar is not all bad, though. Since foreign travelers get more for their money, the US is an ideal vacation area. Companies also find their prices much more competitive in foreign markets.
While there are positives and negatives for a weak or strong dollar, going to extreme in either direction can be dangerous to the US economy. With the Federal Reserve keeping a close eye on the direction of the market, it is possible the dollar will begin to stabilize.