AUTHOR: Frank Wei, CFA, senior analyst at FundQuest and member of its investment committee.

METHODOLOGY: After examining currency market data over the past 10 years, Wei argues that the U.S. dollar is too important to the global economy and financial markets to collapse suddenly, contrary to some investors' fears.

MAJOR FINDINGS: The U.S. dollar is a world currency and will not decline as rapidly as it has in the past, despite interest rate cuts that encouraged money printing. Used to price many types of financial products, it is peerless. If the dollar were to utterly collapse, it would send the global financial markets into turmoil.

Normally, a weaker currency causes inflation, as consumers require more dollars to buy goods. Those dynamics are not expected to play out, however, because of a sluggish housing market, the largest component of the consumer price index (CPI). Housing markets are unlikely to recover for years, so a sharp increase in the CPI is unlikely.

Several parties would benefit from a gradual dollar decline, the first being the U.S. itself. As the dollar's value shrinks, U.S. exports become cheaper, reducingthe real value of future debt repayments. Globally, a weaker dollar is strategically important to China, which can offset futurelosses on U.S. debt payments with cheaper exports to other countries.

Despite interest rate cuts that normally encourage borrowing, the U.S. is in a multiyear process of reducing private indebtedness. That will force consumers to spend less of their earnings and save more, curbing inflation.

HIGHLIGHTS: Investors should always take a long-term approach when investing in the dollar and the currency markets. They are too volatile and it can take a very long time to recover losses. For example, although the dollar has been gradually declining for the past 10 years, it snapped back 28% against the euro in just a little over four months, between July and November of 2008, severely punishing those who bet against it.

THE AUTHOR SAYS: "The U.S. currency... and the U.S. economy is too big to fail-for the world. Too many people's interests are tied to this country. Too many interests are tied to this economy. You cannot just dump it and leave. There is no way to do that."