As would be expected with a declining US currency, commodities are soaring, both in the materials themselves and the companies dependent on them.

But the stock market is in a dilemma: The modestly weakened dollar generally helps equities, but a severe downturn in the greenback can be bad.

And investors looking for safe-haven in bonds have to weigh whether the dollar's devaluation—brought on by the government buying up its own debt—presents enough opportunity in yield to outweigh inflation fears.

"The dollar probably deserves to be weak," says Emily Sanders, president of Sanders Financial Management in Atlanta. "However, the fundamental reasons for dollar weaknesses aren't reason to rejoice."

Here's a rundown of how the sliding dollar is shaping various investment decisions:

Stocks

Diminishing returns seems to best fit the relationship between stocks and the shrinking dollar.

The currency's fall has been beneficial to the market so far because it generates inflationary pressure on the weak economy. But too much of a drop and investors will get skittish about the state of the US government and stocks will react likewise.

"Equities do well with mild inflation and very badly with high inflation," says Peter J. Tanous, president and director at Lynx Investment Advisory in Washington, D.C. "Because high inflation hurts everybody, you can't make a general statement that inflation is good for stocks. It's a matter of degree."

The dollar index has slipped 12 percent since March 9, when the stock market hit its most recent low. Since then, stocks have rebounded sharply, and government moves would seem to indicate that a weak-dollar policy is firmly in place—at least in part to boost the corporate fortunes and thus Wall Street.

That has generated worry, though, that there seems to be no end in sight to government moves that effectively drive down the currency's worth, setting off a dollar bubble that could ultimately pummel if not the entire market, then at least particular key sectors.

"The stock market bubble, the Treasury bubble, the real estate bubble--what is the common link between all three bubbles? The dollar," says Lee Markowitz, partner at Continental Capital Advisors in New York. "The end is near for all the bubbles because the dollar is getting so much pressure from currency markets and politicians around the world."

Still, Markowitz isn't ready to set a timetable on when the market could really feel the effects from the dollar's tumble. He believes when the bubble does pop, banks, as well as companies that do most of their business domestically and those with high leverage will be the most hurt.

In the meantime, stocks have been taking only modest hits during pullbacks.