Markets have been factoring in a probable interest rate rise in September or December after Fed chair Janet Yellen in a speech on Friday confirmed ongoing positive economic data would lead to rate hikes.

American equity investors got a first taste of likely volatilty when Wall Street suffered biggest fall since the first week of May overnight after a spate of data came in better than expected.

But the volatility and even losses on equity, bond and sharemarkets around eventual rates lift-off more likely to be a short-term if past experience is any guidance, says BetaShares chief economist David Bassanese.

"While equity markets may weaken in the early stages of Fed tightening, say the first few months, equities should remain well supported by solid corporate earnings and still reasonable valuations against the backdrop of likely continued low bond yields," Mr Bassanese said.

"It is only in the latter stages of the Fed tightening cycle, when interest rates are clearly restrictive, that equity bear market conditions tend to develop."

BetaShares tracked the performance of the S&P500 Index in earlier Fed tightening cycles such as 1994, 1999 and 2004, finding that while equities dropped in the first three months in 1999 and 2004, they were higher six and 12 months later.

Fundamentally, this evidence makes sense, as interest rates were still relatively low and corporate earnings in the early stages of a cyclical upswing, Mr Bassanese said.

"The Fed is also cautious to only raise interest rates as long as the economic data remains supportive," he added. "With US inflation still low, the Fed has promised that rates will be increased during the next cycle only  very gradually."

Federal Reserve Vice Chairman Stanley Fischer warned of the coming volatility during a speech on Tuesday night in Tel Aviv.

"In the normalising of its policy, just as when loosening policy, the Federal Reserve will take account of how its actions affect the global economy," Mr Fischer said.

"The actual raising of policy rates could trigger further bouts of volatility, but my best estimate is that the normalisation of our policy should prove manageable for the emerging market economies."

The US Federal Reserve has maintained a zero-interest-rate position for six years and rates have not been raised for nine years.

This created an environment of cheap, almost free money since the global financial crisis that artificially capped volatility.

Currency analysts have been tipping the Australian dollar to amble along in its current range until the first rate hike, which many are anticipating in September.

Positive economic data drove the US dollar up on Tuesday night, pushing the Australian dollar down to US77¢.

The data included a 6.8 per cent jump in new home sales, ahead of expectations. Also, durable goods orders declined slightly but core capital goods orders rose 1 per cent, ahead of expectations of 0.3 per cent. Consumer confidence also picked up to 95.43, up from 94.3 in April.