Oct. 14--Is the sky falling?

Some watching the U.S. dollar weaken think so.

As a key dollar index against a basket of other currencies hit a 14-month low Tuesday, the Internet was abuzz with gloomy theories about the greenback losing its position as the pre-eminent currency of the world.

Yet, analysts say there is no evidence that the dollar is in serious trouble, and people who flee in a panic to alternative investments such as gold or foreign currencies could be disappointed with the results.

Nonetheless, concerns are being raised about the future of the dollar as the U.S. pursues policies to bolster the nation's struggling economy. The dollar has fallen largely because of measures to stimulate the weak U.S. economy and rumblings by international leaders to hold reserves other than dollars.

Analysts warn that if the government continues to flood the system with dollars, the massive quantities would cheapen the currency further. The value of the dollar is driven by supply and demand, so a huge supply of dollars reduces the value. In addition, investors are also concerned about the country's budget deficit.

Yet, tightening the supply of money now could be a risk to an economy with a 9.8 percent unemployment rate.

"I think the U.S. dollar will weaken against most developed and commodity-based currencies because the U.S. will lag in the recovery," said T. Rowe Price economist Alan Levenson. "Consumers need to rebuild their savings, and commercial real estate is still in distress."

Members of the Obama administration have said they support a strong dollar. Yet there is a certain benefit to the country in keeping the dollar down. If the dollar is weak, that makes U.S. products cheaper compared with those from other countries. Consequently, the cheap price stimulates foreign consumers to buy products from the U.S., and American consumers might favor products made here. Potentially, that could help U.S. companies become more profitable, likely boosting the value of their stock, and persuade them to hire employees.

Typically, economists do not worry if a currency weakens slowly, as the U.S. dollar has done, but rather fear a sharp, fast plunge.

"I expect moderate depreciation, not a crash," Levenson said. "I don't think the dollar will weaken so much that inflation skyrockets."

Given the view of an ongoing weak dollar, investing overseas can make sense, experts said.

If investors invest in a foreign stock fund, the money that is made in foreign countries is translated back into U.S. dollars. When that occurs, Americans make more money through that conversion into dollars than they would if they simply invested in a foreign company and kept the gain in that country's currency.

But experts warn that investors must be careful with such a strategy. It works when the dollar is weakening, but will operate in reverse, leaving investors with less money, if the dollar surprises people and strengthens.

A safe approach, they say, is to invest in large U.S. companies: Those in the Standard & Poor's 500 earn nearly 48 percent of their sales abroad.

Investors looking to dabble in individual currencies directly need to be careful, analysts said. Anticipating the movement of currencies is one of the toughest disciplines for professional money managers, and bets often end up wrong. For example, the dollar has been slowly weakening since the early 2000s, but the trend was interrupted during 2008, when panicky investors poured money into U.S. Treasurys as a safe haven despite low interest rates.

Analysts say the flood of money into U.S. Treasurys shows that investors worldwide still trust the U.S. dollar. And rather than an exodus out of dollars based on fear of inflation and a lack of international appetite for dollars, analysts think braver investors are simply channeling money toward more lucrative investments such as stocks and other currencies.

Many investors concerned about the dollar have been turning to gold, but some experts fear the momentum may be due to reverse.

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