(FORTUNE Magazine) – Warren Buffett is always right. Okay, not always, but close enough. Which is why when he unequivocally stated in FORTUNE a couple of months ago that he believed the value of the dollar will fall and that he had bought foreign currencies as a way to profit from this belief, well, it caught my eye. And it got me thinking: How can I (read: you!) follow Buffett's lead and make an investing bet on the declining dollar?

I'll leave the hows and whys of the dollar's dip to Buffett (see fortune.com), but, in shorthand, a big reason for the fall is our mammoth trade deficit. Essentially, foreigners are bankrolling our economy. And the trade deficit puts more and more dollars in their hands. They get nervous about their holdings, which puts downward pressure on the dollar. As we went to press, for instance, the dollar was at an all-time low vs. the euro, down 36% over the past two years. (One euro now equals $1.23. Remember when it was 90 cents?) Other currencies such as the New Zealand and Aussie dollars and the South African rand have also been making huge gains vs. the greenback. And neither Treasury Secretary John Snow nor Jack Frost seems inclined to do anything about it. By the way, besides Buffett, plenty of other Wall Street forecasters think the dollar is facing a prolonged slide over the next few years because of the trade deficit.

One way to play the dollar is simply to buy foreign stocks. You can, for instance, buy European or Kiwi or Brazilian equities. You can also invest in shares of a company that relies on exports for a major portion of its sales. As the dollar falls, companies that sell feather dusters to the French, for example, make out because their goods are less expensive to our French friends. Coke has recently done well by this trend. And companies like Weyerhaeuser, DuPont, and P&G are big exporters too.

The most direct way to play an expected decline in the dollar would be to stroll down to Corner Bancorp and buy $10,000 of euros, stick the colorful bills in your safe deposit box, and reconvert the currency to dollars in, say, a year. But it's not a particularly efficient way to do the job, because of transaction costs and because you'd get so much more bang for your buck from derivatives (futures, options, forward contracts).

There are all manner of currency derivatives these days, but here are a few general points. Those in the biz emphasize that trading currency is speculation, not investing. That said, traditional relationships between reward and risk apply, and believe me, there is plenty of risk to go around in this market. You can trade futures contracts at the Chicago Mercantile Exchange. Or trade currency directly by opening an account at a firm that specializes in that business. Three of the largest players are FXCM, Saxo Bank (Danish, actually), and CMC (British). The minimum lot at FXCM is $10,000, and you can leverage up to 95%. Ergo, for a $100,000 trade, which is the kind of size we are typically talking about, you'd have to put only $5,000 down.

A less dicey way to play this game would be to buy a CD denominated in foreign currencies from an institution like Everbank. Rates seem to be higher everywhere but here. For example, a six-month Australian dollar CD quoted by Everbank yields 4.42%. That's compared with 1.26% here. You could buy international bonds. Or international bond funds could provide a nice currency kicker--but most fund managers hedge, which negates those as currency plays. Two funds from reputable firms that don't hedge are American Century International Bond (BEGBX) and T. Rowe Price International Bond (RPIBX).

Of course, once you think about dollar plays, the mind fairly reels. You could go long on closed-end country funds. And David Malpass of Bear Stearns points out that the weaker dollar tends to drive up commodity prices. Hey, I'm not saying you should mortgage your houseboat to get in on these dollar plays. But let's remember where Buffett has laid down some of his chips.