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With the losses in the financial sector in the U.S. sub-prime mortgage industry, it has forced the Federal Reserve to cut interest rates, and possibly more in the near future ... which has resulted in the continuing downward spiral of the U.S. dollar.

Ashraf Laidi, who is chief currency analyst at CMC Markets, says "There is not much to stop the dollar from falling as long as the Fed may be forced to cut interest rates further. The downside seems to be quite unlimited."

The U.S. dollar is at record lows against a number of currencies, and most don't give it much hope to strengthen any time soon, as there aren't many that are able to find any support for it at this time.

To make things worse, the market is now starting to believe the end isn't even near yet in the problems relating to the problem loans, as $1 trillion in losses is being thrown about as the potential reality of the problem.

Bill Gross, the chief investment officer of Pacific Investment Management, said US mortgage delinquencies and defaults would increase in 2008. “There are $1 trillion worth of sub-primes, Alt-As [self-certified] and basically garbage loans. We’ve only begun to see the pain from rising mortgage payments." Gross says he sees the actual loan defaults coming in at around $250 billion.

The major problem being looked at is it was thought that the bad news had already been factored into prices, where now it's starting to be realized that it has only been the first phase of the problem, and a lot more is expected to come in 2008. Nobody knows who will end up holding the debt when it comes down to it.

This is why there is no way to know how far the U.S. dollar is going to fall. It's not near to being over yet is what is being discovered.

Financial institutions across the world are nervous on how it will impact them. Britain has already experienced some problems, and some German banks look like they could be next. Dominoes anyone?