Anyone looking for the dollar to surge after the Federal Reserve lifts interest rates has a short memory.

The U.S. currency strengthened an average of almost 9 percent during the six to nine months prior to the past three rate-rise cycles. After that, it's been a downhill ride, with the six-month drop averaging about 6 percent.

``The assumption that the dollar has to go up as the Fed tightens is not borne out by history,'' David Kelly, chief global strategist at JPMorgan Chase & Co.'s JPMorgan Funds unit, said in a phone interview. ``It does tend to go up in advance of an actual rate hike, but it's one of those cases where people buy the rumor and sell the fact.''

The Fed is planning to increase interest rates this year for the first time in almost a decade. That's propelled the U.S. currency, spurring hedge funds and other large speculators to pile into positions that would profit from further strength.

David Fuller's view

Looking at the graph in this article, the relationship is no where near as precise at the headline above suggests. 

However, we have reasons to believe that the Dollar Index will not rally too strongly over the medium term.  It may actually weaken somewhat, which of course is what the Fed would like to see.  There is a good possibility, I maintain, that the Fed has quietly intervened on occasion since DXY reached its recovery high to date of just over 100 in March. 

US multinational Autonomies have seen their consolidated earning squeezed by the strong Dollar. Therefore a softer Dollar would support the US economic recovery.  It would also remove pressure on emerging markets which borrowed Dollars at lower levels.