NEW YORK - May 6, 2011 - It is almost becoming an affront to the legacy of George Washington to have to grace the lowly greenback.

While the currency managed to claw back some ground amid turmoil on global markets this week, it remains on the verge of sinking below a pair of important thresholds. The first is the 2008 record low.

But perhaps an even greater indictment of the U.S. dollar is its depreciation against the euro, a currency that’s one sovereign default away from an existential crisis. At US$1.50, the euro will have climbed all the way back from last year’s plunge.

The downward trend is quickly lowering confidence in the currency among the major creditors of the United States.

“I think you’ll see a lot of turnover once we cross those thresholds,” said Mark Calabria, director of financial regulation studies at the Cato Institute in Washington, D.C. “I think we’re going to cross those thresholds.”

Of the forces guiding the greenback, almost all of them promise further weakness. About the only mitigating factor is the sheer economic power of the United States, which remains the world’s safe haven of choice, effectively putting a limit on the dollar’s losses.

“Absolutely, there is a floor under the dollar, but we’re not there yet,” Calabria said. “Nobody knows quite where that floor sits.”

Against a basket of currencies, the dollar has lost almost 18% since last June and more than 10% since December, raising the concern that panic selling has already set into foreign exchange trade. The U.S. dollar index fell to 72.933 on April 29, nearing the all-time low of 71.329 set during the financial crisis in 2008.

“The rout of the U.S. dollar has begun in earnest,” Dennis Gartman, a trader and editor of the Suffolk, Virginia-based Gartman Letter, wrote in a recent commentary, noting the dollar’s fall against virtually every major currency in the world.