For U.S. Treasury Secretary Timothy F. Geithner, a weaker dollar may now be in the national interest.

The dollar has dropped more than 7 percent since Aug. 27, when Chairman Ben S. Bernanke signaled the Federal Reserve is prepared to ease monetary policy. Where once such a decline may have been met with resistance from the U.S., Geithner may now be tolerating it as a way of bolstering the recovery.

Companies from Costco Wholesale Corp. to Deere & Co. have credited the weaker dollar for giving their earnings a boost, and the currency's slide has helped propel the Dow Jones Industrial Average above 11,000 for the first time since May.

Higher stock prices in turn are bolstering consumer and business confidence. The danger is that the decline gets out of hand, fueling increases in the cost of living over the long term and prompting investors to avoid U.S debt.

"In an era where deflation pressures appear to be the greatest risk, growth is below trend and the U.S. wants to boost exports, why would they not want" a weaker dollar, Jim O'Neill, chairman of Goldman Sachs Asset Management in London, said in an interview. "The answer is when it becomes a problem for financial markets. Until then it's a straightforward strategy."

The U.S. currency is slipping in reaction to a decline in interest rates that's making U.S. assets less attractive to overseas investors. The yield on the two-year Treasury note touched 0.3508 percent yesterday, the least since reaching a record low 0.3270 percent on Oct. 12.

Eoin Treacy's view There has been a cacophony of protest at the speed with which the US Dollar has weakened, with a number Asian and Latin American countries introducing measures to slow the ascent of their respective currencies against the greenback.

The Dollar Index has become oversold in the short-term and this week's rally is larger than any since early August, suggesting that it has found at least short-term support. The Index rallied almost four points in August and a sustained move of at least that magnitude would be required to indicate that a medium-term low has been reached.

This is also the largest reaction in a number of months for the Asian Dollar Index and there is evidence in Korea (KRW) and Taiwan (TWD) that the weakening of the respective currencies is weighing on their stock markets.

The Latin American Dollar Index is much less overbought but has also pulled back somewhat. A sustained move above 116 is now required to reassert the medium-term uptrend. This is likely to be the first down week for Peru in quite some time and probably marks a medium-term peak.

Given the inverse correlation between the Dollar and a large number of risk assets the likelihood that better performing stock markets and commodities are close to a medium-term peak has increased.