The strong US dollar a feature of global markets for the past three years may finally be on the wane against European currencies.

The dollar has benefited from investors looking for a safe haven from market turmoil in Asia and Russia. But with Alan Greenspan, the Federal Reserve chairman, now warning that the US cannot `remain an oasis of prosperity`, the chances of a US interest rate cut have increased.

"I think it probably is the end of the big rally upwards in the dollar," said Ms Bronwyn Curtis, chief economist at Nomura International investment bank in London. "I think people are now looking at the world impact on the United States."

For most of the period since 1995, the dollar has been strong against the deutschmark and other European currencies. It reached a high of DM1.86 at the end of last year, and fell 10 pfennigs before recovering to above DM1.83 this year.

But in recent days, the dollar has lurched downwards. Last week the dollar slipped by eight pfennigs to its lowest level against the D-mark this year, to below DM1.72.

"In the short term, there will still be some safe-haven buying of the dollar. But there are more negative factors weighing on it," said Mr Tony Norfield, global head of treasury research at ABN Amro bank.

The fall was sparked by what currency analysts call `technical factors' too many people who had bought dollars suddenly wanted to unload them. Other short-term factors included the desire by Japanese institutions to cash in their dollar assets and exchange them for yen. US hedge funds have been selling assets to cover margin calls and losses abroad.

The dollar has also developed a link to the US equity market. It is usually closely tied to the market for US government bonds, or Treasuries. But Mr Norfield said the past year has seen big inflows into US equities from abroad.

"Wobbles in the equity market are going to make a lot of overseas investors sick," Mr Norfield said, especially those already sitting on substantial emerging market losses.

"It does indicate a far greater exposure of the dollar to equities than previously," he said.

Further equity weakness would reinforce the flight out of the dollar. At the same time, the market has sharply increased its estimate of a likely US rate cut. The futures market has priced in a 0.5 per cent cut in the Federal Funds rate by May next year.

Signs of a slowdown in the US, and a recovery in Germany, will shift the tide in favour of the D-mark. That in itself may be good news, as a weaker dollar takes some of the pressure off the emerging market currencies.

A weaker dollar also helps to bring forward a recovery in commodity prices which are largely denominated in dollars boosting the currencies of Latin America as well as South Africa, Australia and Canada.