The slowing economy has not only shaken Americans' confidence in the strength of their currency but foreign investors' as well.
That could be good news for the euro, the single currency used by 12 countries in the eurozone. The euro had by declined by more than 30% against the dollar since its launch in 1999.
A declining dollar would have both benefits and costs for the US economy. For American business a weak dollar creates new opportunities to sell cheaper goods in foreign markets.
But US consumers will find that a drop in the dollar's exchange rate is threatening their buying power. Americans have become accustomed to buying foreign goods at bargain-basement prices. And US tourists will find that overseas travel has become more expensive.
"A sharp dollar decline would bring real inflationary consequences," says C. Fred Bergsten, director of the Institute for International Economics in Washington, DC.
Speaking at a meeting at the Centre for Economic Policy Research, Mr. Bergsten added the US could be hit by a triple whammy of rising prices, rising interest rates and a falling stock market, thus threatening confidence in the economy of the world's only superpower and reducing foreign investment.
Trade deficit puzzle
Also of concern to financial analysts is the current account deficit, the debt accumulated by trade and foreign investment, which in the US now stands at $500bn, or 5% of the nation's gross domestic product - a historic high.
But the deficit's effect on the dollar is debatable, with analysts argueing whether it is a bad thing at all.
"Whether a current account deficit is a problem... depends in part on a chicken-and-egg judgement - what you think is causing it, and how sustainable the trends are," says Alison Cotrell, analyst at UBS Warburg.
A large deficit is caused by increased demand for imports and investment in the US by foreign investors, among other things. The US has seen vast flows of capital into the country in recent years, as foreign investors tried to cash in on a booming economy and hungry American consumers.
Much of that investment has been spurred by outstanding growth within the US, which ran at an annual clip of 6% in the first two quarters of 2000. Now an economic slowdown threatens to throw the country into recession.
"The prospects still point to a soft-landing scenario" for the US economy, said Goldman Sachs managing director Gerald Corrigan.
Speaking to reporters at an economic forum in Taipei, the former New York Federal Reserve president said he expects growth in the US of around 2.5% for the year.
Slowdown looms
Some economists are more pessimistic.
Mr. Bergsten warned that given the extraordinary growth experienced in recent months, a slowdown to a growth rate of about 2% could feel abrupt. Liken it to a car speeding down a highway at 90 miles per hour only to suddenly slow to 30 miles per hour.
The US may not technically see a recession, viewed as two back-to-back quarters of negative growth, but the slowing would be quite noticeable, Mr Bergsten said.
The rapid recovery of the euro also threatens confidence in the dollar. In recent weeks, the euro has surged, most recently trading at about $0.9460 in New York.
According to Mr Bergsten, the euro remains extremely undervalued. He said the euro would achieve balance with the dollar when it trades at 1 euro per $1.25, about 33% above its current level.
But he warned an appreciating euro faces a reluctant European business community, content with the euro remaining undervalued.
A cheap euro ensures European goods will remain inexpensive in America. It is a proposition that appeals both to European exporters, and to American consumers, whose voracious appetite for foreign goods is not likely to be slowed unless prices rise - and the dollar falls.
But many of the eurozone's consumers - and voters - believe that the euro weakness shows that it is a failure.
With the launch of euro banknotes and coins less than one year away, many analysts therefore expect the European Central Bank to intervene and boost the euro further.