eventually the gov freefall at the printing press will cause the dollar to quickly weaken again. Causing countries like japan and china to be upset since they are holding much of the u.s. bonds. Until they cannot take it anymore, and will sell their bonds in the free market causing a crash in the dollar.
But isn't the US gov. counting on the fact that any country dumping bonds will inflict equal pain upon themselves.
The question you should ask yourself is: Why was the USD getting shorted in the first place? Also, look at the YEN. Japan is economically in such deep shit, that there is hardly a historical precedent to compare it with. However, the YEN is strenghtening. LESSON: FX HAS LITTLE OR NOTHING TO DO WITH ECONOMIC FUNDAMENTALS! IT HAS EVERYTHING TO DO WITH HEDGE FUNDS PUSHING THEIR WEIGHT AROUND
I wouldn't go so far as to say it having "everything" to do with the hedgies. Central bank flows have a huge effect.
Relative to other countries including euroland .. I believe as others do that the United States recession will be milder than other countries on the basis of the unemployment rate. A long term bet against the dollar is a long term bet against the US. I could even see a "double top scenario" where EUR tests the July highs. Relative to other currencies, the dollar isn't that bad. Holding money in the US is still the safest country to do business in terms of the judicial system and property right. Homes on star island in Miami or the cliffs of Malibu will always be prime real estate.