Impacts of Stronger Greenback if Dollar Rallies

The stronger dollar is also a drag on large-cap multi-nationals that generate significant portions of their revenue in markets outside the U.S., likely explaining, in part, why small-cap stocks and ETFs are thriving this year. A stronger U.S. dollar and concerns over weaker global growth also pushed investors toward smaller company stocks that tend to earn most of their money from a still growing domestic economy.

“U.S. multinationals will also get squeezed. Companies that generate revenues overseas have to convert international sales back into U.S. dollars, reducing the overall amount,” according to CNBC. “Longer term, the dollar should move lower than where it is today, due to the large U.S. trade deficit and mean reversion of international interest rates and economic growth.”

Traders considering a bearish position on the dollar can consider the Invesco DB US Dollar Index Bearish (NYSEArca: UDN), an inverse though not leveraged bet against the greenback.

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