Richard Berner, chief U.S. economist at Morgan Stanley, frets more about protectionism than about the falling greenback:
I don't buy the dollar crisis scenario; instead, a softening economy, falling inflation, and policy easing are classic signals of a benign decline. While the dollar is hitting record lows, the pace of the dollar's decline has been measured, if relentless. And neither investor flows nor positioning seem to indicate sizable short dollar positions; if anything, investors have been surprised at how weak the dollar has been lately and seem to be playing catch-up.... [Yet] three risks worry me: First, the pace of the dollar decline could intensify, unsettling investors. Second, the combination of these developments may boost inflation expectations. Finally, in a weak economy, the threat of protectionism will escalate, which would push up inflation and undermine growth.
And after surveying the American and European economies, economist Robert Brusca agrees: "It is fair to say that the U.S. is in state of repair and Europe is in a state of despair. So much for the fate of the poor dollar.... Dollar rules! Euro drools! Why? Because the dollar and U.S. economy can survive this sort of thing since IT IS A REAL RESERVE UNIT with all the trappings. The euro, sadly, is not."