The dollar’s dominance could be a trouble for few trades, analysts say. On Wednesday, the dollar index hit a one-year high against other popular currencies. Investors expect that the federal reserve will close the stimulus by the end of the fourth quarter. The expert suggested that if the dollar’s price continues to grow, it could hurt some industrial stocks.
Such companies get their revenue from overseas. One of them is Caterpillar (CAT), which generates more than 60% of its revenue from outside the United States. Analysts believe if the dollar surged, then industrials would be the weakest sector.
The recorded fall in industrials is about 3.5% since the dollar started rising in June. The surging dollar may create huge pressure on industrials to sell more over the next few weeks. The dollar index goes over 94% on Wednesday.
Caterpillar shares closed down by more than 1% at $197.8 on Wednesday. Reports stated, investors are likely to buy the dip as the trend remains negative, but the dollar keeps moving upward, and it needs to slow down and stagnate at some point so that its high prices cannot impact the industrial stocks.
The Caterpillar shares need to follow a bit downward movement as traders are looking for a weak seasonal time to buy the shares. Investors see Caterpillar as an attractive stock as the dollar keeps strengthening.
The strong dollar’s strength could also impact another part of the market. The dollar rise could hurt the gold as gold is being a solid competitor of digital currencies. In addition, interest rate yields keep increasing due to the rise in normal yields, and it can hurt gold leading to the downward movement.
It can already be seen in the recent downward movement in gold prices, analysts said. As of now, gold fell to $1720 on Wednesday.