THE ailing dollar got out of bed on June 6 to see what US Federal Reserve chair Janet Yellen had to say, shrugged its shoulders and promptly headed back under the duvet.

Laid low by June 3’s spectacularly poor jobs growth data, the dollar barely moved in response to Ms Yellen’s health check on that other patient, the US economy.

Although she suggested that the economy was not as bad as the market thinks, the greenback looks set for a long bout of convalescence.

Greenback looks set to stay rangebound for rest of the year after reaching a plateau

It has been a year of feverish activity for the world’s biggest reserve currency — looking sprightly in the early months amid global market turmoil, weakening from an insipid US economy and Ms Yellen’s most dovish speech in March, perking up in May as the economy warmed up, and now sick again.

There is only so much an old guy can take, even one as formidable as the dollar, and there is only so much optimism to go around for dollar bulls.

The market has killed off a rate rise at this week’s Fed meeting and only offers an even probability of the Fed moving on rates until December.

“It leaves the US dollar more vulnerable to the downside in the near term,” says Lee Hardman, currency strategist at Bank of Tokyo-Mitsubishi UFJ. BNP Paribas strategists expect the euro to return to the early-May highs of $1.16.

A Fed fixated with preventing market turbulence is one whose shifts in guidance are pivotal to how the market reacts, says Neil Mellor, FX strategist at BNY Mellon — and that makes rate rises so acutely difficult.

“In the meantime, the world may have to face up to a renewed phase of dollar weakness — anathema to any central bank whose economy is subjected to unrelentingly low price pressures, which to all intents and purposes means almost all of the G20 nations,” he says in a note.

This, though, may be more than just a phase. The endgame for the dollar bull run is approaching, and may even have arrived.

Dollar bulls will cling on, pointing to German bond yields now in negative territory, which should keep interest rate differentials between the US and Europe and Japan elevated and therefore support the dollar.

In the longer term, “the dollar upside is behind us”, says Jan Dehn, head of research at Ashmore Investment Management. For one thing, the dollar’s 40pc rise since its quantitative easing programme has made the currency a victim of its own success.

“It’s become so strong that it’s difficult to grow and to raise rates. If you tighten, you threaten the stability of the financial markets,” adds Mr Dehn.

For another, says G10 FX strategist Athanasios Vamvakidis of Bank of America Merrill Lynch, this is a forex market that this year has been driven less by fundamentals and more by market positioning and the comments of Fed members.

“Even if the recent job data are an outlier, and the data are better, it’s hard to see a substantial improvement in the dollar,” Mr Vamvakidis says. In any case, he adds, all the other data suggest the US economy lacks momentum.

“It is very hard to see either another dollar rally or a sell-off. Positioning is neutral at this stage.”

That leaves the dollar probably going through further phases of weakness and strength for the rest of 2016, but likely to remain rangebound. “We have reached a plateau,” says Mr Dehn.

That may suit many parts of the global economy. Dollar strength was a 2015 problem for, among others, the US economy and its exporters, as well as emerging markets. But by the start of 2016, it was in the interests of most of the global economy to see the dollar weaker.

“Suddenly everybody’s interests were aligned,” Mr Dehn argues, leading to the so-called “currency wars truce” at February’s G10 meeting in Shanghai.

As for the dollar, the next chapter will be written when the Fed finally presses the rate rise button. The timing, Mr Dehn predicts, will come at the end of the year or the start of 2017 — by then the US will have a new president. Who knows just when it will be safe for the dollar to emerge from under the duvet.

Published in Dawn, Business & Finance weekly, June 13th, 2016