It's worth recalling, just to keep things in perspective, that the year of the Incredible Shrinking Dollar began with the U.S. currency hitting a 3 1/2-year high against the Japanese yen and an entirely respectable level against the pre-unification West German mark.

But then it was all downhill as U.S. economic troubles hammered the dollar to a series of postwar record lows against the mark, with a less dramatic but just as pronounced fall against the yen. Only the Persian Gulf crisis gave relief to the dollar - yet even that was limited and sporadic.Against the mark the dollar swung by 15 percent from a high of 1.7252 marks on Jan. 22 to a nadir of 1.4678 marks Nov. 16 - a record low price. From top to bottom it fell 22.2 percent against the yen, touching 159.82 yen at the New York close April 17 and dropping to 124.35 yen on Oct. 18.

Measuring from the dollar's year-end 1989 prices of 1.6900 marks and 143.80 yen to some 1.48 marks and 134 yen as 1990 closed, the greenback had skidded some 12.6 percent vs. the mark and 6.8 percent vs. the yen.

The British pound sterling's steady climb against the dollar was for the most part economically driven, by double-digit British interest rates and by the currency's entry into the European Community exchange grid. It touched a high for the year of $1.9775 Oct. 11 from its low point March 21 of $1.5940.

Many analysts and traders see a modest dollar comeback in 1991, particularly if the Group of Seven economic powers decides to defend it and America pulls out of its financial tailspin. The dollar could bounce back even more if the key overseas economies should start to lose some momentum.

Politics also could revive dollar fortunes, particularly against the deutsche mark, as shown by the flight to the dollar when Soviet Foreign Minister Eduard Shevardnadze gave notice. The Deutsche Bundesbank, Germany's central bank, may master inflation, but its writ doesn't run to foreign policy.

Yet that same political uncertainty makes crystal ball gazing a perilous art. With the world still on the cusp of change - especially in the Mideast - the dollar also is hostage to events. Moreover, the domestic economic clouds that have so weakened it will not quickly or easily be dispelled.

The cold, hard reality for the dollar was that as the Federal Reserve eased credit through 1990 to nurse the economy, global money managers more and more looked to Frankfurt, Tokyo, Zurich and London for the best inflation-adjusted yield on money market deposits and investments. Many U.S. investors saw more opportunity overseas, where they gained as the dollar fell.

The high interest rates that pulled a tidal wave of world capital to America in the 1980s to finance U.S. debt have slipped away. Japanese financial market tremors have called roaming capital homeward. German savings now are allocated to the reconstruction of the former German Democratic Republic.

"Basically, this year for the first time in many years, Japanese investors were net sellers of U.S. bonds - I think that was incredibly important for the dollar," said Mark Brett, senior currency analyst for Barclays de Zoete Wedd, a London investment bank. "If someone put a gun to my head and asked what was the big change, I would say that is it."

He added that in Germany, where the government is now piling up huge deficits to finance East reconstruction, and a tight monetary policy is keeping upward pressure on money market and Bund (German government bond) rates, "you have almost the same combination you had in America in the early 1980s."

"To my mind, the key factor has been that interest rates in the United States have come down sharply, whereas interest rates in Germany and Japan have been rising over that period," said chief economist Carl Bernstein of High Frequency Economics, a New York-based consulting firm.

Bernstein said the interest rate differential between comparable 90-day money market instruments in yen and dollars went from an inflation-adjusted 1.40 percentage-point U.S. advantage to 1.20 points favoring Japan. Germany began the year 0.23 percentage point ahead and ended it up by 2.29 points. Spreads like that make a difference to the big players.

Said Lisa Finstrom, a foreign exchange analyst for Shearson Lehman Brothers, American Express Co.'s investment bank: "We still think that the dollar is going to be under downward pressure and will be weak in the early '90s as a whole. The key to that is a structural shift in capital flows."

"In the '80s a lot of people were talking about Eurosclerosis," Finstrom said. "We believe that the United States is going to have that kind of a phenomenon for the '90s, a bit of a retrenchment."