The causes behind the weak dollar are many and complex, but essentially this means that investors around the world have become less confident in the future stability of the dollar and more confident in other currencies. The effects of the weakening dollar can also be complicated, but the upshot is that it's cheaper for people in other countries to buy American-made goods and services and more expensive for Americans to buy things sold in other currencies.

The Explosion of Currency Funds
Another effect has been the creation of a slew of new mutual funds and exchange-traded funds that allow people to bet on the rise or fall of various currencies, especially the dollar. Just five years ago, there was only one such fund, Franklin Templeton Hard Currency (ICPHX). It invests in money market bonds denominated in various foreign currencies that the managers believe are undervalued relative to the dollar, so that it benefits when those currencies rise and the dollar falls. Since the beginning of 2005, several more such funds have sprung up. There's ProFunds Rising U.S. Dollar (RDPIX), which tracks the New York Board of Trade's U.S. Dollar Index (USDX), and ProFunds Falling U.S. Dollar (FDPIX), which shorts the same index and thus benefits when the dollar falls.