After surging 25% from last July through this March, the US Dollar index went through a “correction” phase in the second and third quarters of 2015. Since the middle of October, though, the dollar has been on fire. In case you weren’t aware of the recent strength, take a look at the chart of the Dollar index below. Since dipping below 94 on October 14th, the index has surged 6.4% and is attempting to take out its highs from earlier this year. On Friday, the index closed above the psychological 100 level. It is still holding that level and needs just a few more ticks to break out. Don’t expect it to be easy, though, because the prior highs could act as stiff near-term resistance.
Movements in the US Dollar can have a big impact on earnings. Companies with a high percentage of international revenues get hurt by a strong dollar, while companies that generate all of their revenues domestically benefit from it. Given the surge in the dollar that we’ve seen over the last six weeks, we’d expect to hear about its impact (mostly negatively from the big internationals) when fourth quarter earnings reports get released in January.
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