FRANKFURT (AFX) - The dollar could fall even further if the US' high net capital inflow declines rapidly, the Bundesbank said in its monthly report. Commenting on the pros and cons of the floating rate system -- the currency regime used by the dollar, euro and the yen -- the bank said significant deviations should not be simply labelled as a "misalignment" because currency levels also reflect the inflow and outflow of capital. It noted that the strong appreciation of the dollar in the mid-1980s and the strong yen in 1995 were eventually reversed. "In contrast, it is more difficult to assess the current value of the dollar," it said. It said the high net capital inflow to the US supports investment, consumption and economic growth in the US, and consequently has contributed to the country's high current account deficit. This high net capital inflow "could decline swiftly if foreign creditors and investors assess the future economic outlook in the US less favourably than now." "The US dollar would then decline further in value," it added. It said although the floating rate tends to go through short-term currency swings, fears that the euro would be more volatile than the deutschmark "have not been confirmed." It said "international pre-arranged interventions could serve as a useful signal in isolated cases in order to make clear to the markets when necessary the policy intention and help influence the currency course to the desired path."