Dollar bears have been worried about the ability of the United States to fund continuing deficits and the detrimental effect of a weak dollar.

However, robust equity markets and steady appetite for US Treasuries suggest investors still have faith in US assets.

But there is a tipping point. Analysts point to a move to US$1.60 by the euro, the dollar's record against the single currency, as a level that would be the source of alarm.

The dollar has declined 15 percent against a basket of six major currencies from the highs set in March and is down more than 37 percent from a peak in 2001.

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Last week, the greenback was steady with the euro hovering below US$1.50, off about 6 percent from the euro's record high at US$1.6040 set in July 2008.

"If we breach US$1.60. I think that's too far, too fast and could cause concern about a dollar demise," said Michael Woolfolk, BNY Mellon's senior currency strategist in New York.

Low US rates have contributed to the dollar's weakness in recent months as investors use it as a funding currency in carry trades, in which traders borrow in low-yielding currencies and invest in assets with greater returns.

The Federal Reserve last week kept interest rates at near zero, and expects to maintain that for "an extended period."

The US$1.60 level is likely the maximum exchange rate in which central banks will tolerate weakness in the dollar.

Beyond that, analysts expect some form of intervention, verbal or otherwise, to support the US currency.

Already, some central banks, such as Australia and Norway, are noting unwanted strength in their currencies as they have started to raise rates.

"The market appears to be taking the appropriate view that we are sucking the last juice out of the short dollar trade," said Alan Ruskin, global head of currency strategy at RBS in Stamford, Connecticut.

For now, a weak dollar is viewed as desirable for boosting exports for the ailing US economy. But the weak dollar, along with China's management of its own currency, has other nations, particularly in Europe, concerned about the threat of inflation there. Some economists caution that a weak dollar risks a flight out of US assets, leading to a damaging spike in US rates. But the United States, due to its size and the dollar being the world's reserve currency, has a natural buffer that separates it from smaller economies that have suffered from the swift exodus of capital.

Ethan Harris, Bank of America- Merrill Lynch's head of global economics, noted that it took a 50 percent drop in the dollar in the 1980s before it created upward pressure on bond yields - amid fears of knock-on inflation - and contributed to the 1987 stock market crash.

"Are we in that same kind of environment today? There are some elements of it," he said in a recent conference call.

In addition to the dollar's level, the swiftness of the US currency's fall is also key, and the fear it can cause. Analysts say volatility indicators suggest there is fear of further dollar weakness and a more tumultuous trading environment.

REUTERS