Anyone looking for the dollar to surge after the Federal Reserve lifts interest rates has a short memory.
The US currency strengthened an average of almost 9pc during the six to nine months prior to the past three rate-rise cycles. After that, it has been a downhill ride, with the six-month drop averaging about 6pc.
"The assumption that the dollar has to go up as the Fed tightens is not borne out by history,'' says David Kelly, chief global strategist at JPMorgan funds unit. "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 has propelled the US currency, spurring hedge funds and other large speculators to pile into positions that would profit from further strength.
The Bloomberg Spot Dollar Index, which tracks the greenback versus 10 major peers, is up 6.8pc this year. The currency is forecast to strengthen to $1.06 against the euro and to trade at 125 Japanese yen by the end of the year, according to a Bloomberg survey of analysts.
Officials increased rates by an average 2.25 percentage points during the first year of previous rate-increase patterns. This time, policy-makers are targeting a federal funds rate of only 1.625pc by the end of 2016, with officials using phrases including "crawling", "gradual" and "steady" to set the tone.
China's devaluation of the yuan/renminbi last week may further slow that pace.
That means a dollar let-down may be more pronounced this time, with Fed officials planning to shun the aggressive tightening of the 1994, 1999 and 2004 cycles. US economic growth has been uneven, and inflation remains well below the Fed's 2pc target amid slowing global growth and plunging commodities prices.
"A lot of the rate dynamic is priced in," says Nick Kalivas, a senior equity product strategist at Invesco PowerShares, which has about $97bn of assets in its funds. "Pace really plays into it."
The dollar fell 9.3pc in the six months following 2004's first rate increase, even as the Fed tightened another 100 basis points, according to the Intercontinental Exchange US Dollar Index, which tracks the currency against six major peers.
The same pattern holds for 1994, when the measure slumped 6.9pc, and for 1999, when it lost 1pc. However, the backdrop for a potential rate increase looks different this time, according to Adam Cole, London-based head of global foreign-exchange strategy at Royal Bank of Canada.
All tightening cycles are different, and market reaction depends on why the Fed is raising rates, as well as the global context, Cole believes.
The bank is dollar-bullish "in moderation", he says.
With central banks from China and Australia to Europe and Japan cutting rates, buying bonds and massaging exchange rates, the US recovery looks solid by comparison.
US two-year notes yield more than comparable-maturity government securities from 18 developed nations, according to data compiled by Bloomberg. An increase in yields, spurred by a central bank rate increase, would further enhance the allure of dollar-denominated debt.
Traders are pricing in a 46pc probability that the Fed will raise interest rates next month, based on the assumption that the effective Fed funds rate will average 0.375pc after the first increase.
"After the announcement really comes out, we may have a dollar sell-off," says Kevin Chen, chief investment officer of Three Mountain Capital Management, a New York-based hedge fund that manages $15bn.
"A lot of the Fed actions are going to be in the price."