After rising by 5% against a basket of currencies since the start of June, the dollar is once again on a roll, propelled by the U.S. Federal Reserve signaling earlier-than-anticipated interest rate rises, and problems in economies from China to Europe that have made investments in dollars more attractive.

The dollar is trading at close to a 19-month high versus the Japanese yen, a 14-month high against the euro, and a one-year high on the dollar index, which weighs the greenback’s value against six major currencies.

An appreciating dollar can be a problem for U.S. corporations as sales and profits made in foreign currencies convert into fewer dollars. Lately, the strong dollar has been closely linked to two major headwinds facing stocks: rising prices and slowing growth. “We have been arguing that rising inflation, and stagflation risks in particular, will support the USD,” BofA Securities’ FX (foreign exchange) team wrote in an investor note on Monday, in explaining why they see further appreciation of the dollar through year-end.

What a strong dollar means for earnings season

The strong dollar is dividing analysts, particularly as the greenback’s unexpected bull-run pushes into a second year.

As the third-quarter company results season starts later this week, some market experts said they would be scrutinizing earnings statements for signs U.S. corporate profits might be hit by the stronger dollar, while others said the dollar had not firmed enough for it to have much impact.

If the dollar’s rise continues though, as many foreign exchange experts expect it to do—at least in the short term—it could become an issue for American corporates.

Jane Foley, head of FX strategy at Dutch bank Rabobank, said she would be looking out for any signs of pain from the strong dollar in U.S. companies’ Q3 results.

“I will certainly be watching for that—it seems possible,” she said. She cautioned that “it might be a little bit too early to see that though because a lot of companies hedge their currency exposure so…they won’t necessarily feel the impact yet.

“What would be more interesting is in another quarter, if we have persistent dollar strength into year-end, I think at that point, yes, we are going to hear a lot more about that,” she told Fortune.

And Foley does expect dollar strength to continue for the rest of this year. While there was some scope for a correction after the dollar’s recent run-up, “I don’t envisage that the dollar is going to correct significantly lower until we have all of the factors in place for a proper recovery in emerging markets. And I can’t see that happening right now,” she said.

No impact…yet

Derek Halpenny, European head of global markets research at Japanese bank Mitsubishi UFJ Financial Group (MUFG), said he didn’t see the stronger dollar having any impact on U.S. companies’ third-quarter results.

“From purely FX, I don’t think we’ve had the moves that would really start to be clearly evident in the data. I think the big focus in terms of corporate earnings is going to be on margins. Margins have been very healthy given what’s happening in supply constraints, energy price rises. Are we going to see potentially a more dramatic shrinkage in margins? That could start to be a factor that could weigh on equity sentiment going forward,” he said.

If the dollar continues to strengthen, though, it could become an issue for U.S. companies, he said. “Certainly, at a point, I think it could start to have an impact. It’s not in our forecasts. We see the dollar only marginally stronger from here,” he said.

MUFG recently raised its dollar forecasts, and now sees the U.S. currency strengthening against the euro and Swiss franc, for example, through the first quarter of next year before weakening more generally against major currencies from the second quarter onwards.

‘It’s not cheap’

Tim Graf, head of macro strategy for EMEA at State Street Global Markets, also does not expect U.S. companies to cite the strong dollar as a problem in their third-quarter results.

“If the dollar was an issue, it has been an issue for a while, because the dollar—even after the fall we saw last year—is on a lot of measures still fair to expensive, it’s not cheap. So I don’t think it’s a new problem,” he said.

U.S. tech companies often invoice in dollars, he noted, meaning they are less exposed to foreign currency risk. “I don’t think it’s going to be a positive, but I don’t think it will be cited as a reason for earnings issues at this point, not least because the rally we’ve seen is, in terms of previous dollar trends, pretty small,” Graf said.

He pointed out that the dollar strengthened by 20% to 25% between 2014 and 2015, and that “U.S. equities dealt with that really well…If you look at the S&P during that time, you’d barely know there was a problem.”

The COVID effect

The dollar soared early in the pandemic back in March 2020 as investors flocked to a safe haven, but it weakened for much of the rest of 2020 as the U.S. rolled out massive stimulus. 

The dollar’s strength this year surprised many analysts who predicted at the start of 2021 that the dollar’s slide would continue as economies around the world reopened, making it attractive to invest in any major currencies other than the dollar.

But that so-called reflation trade has essentially ended as problems ranging from the slowing Chinese economy and the debt crisis in that country’s real estate sector to supply chain problems in Europe and surging energy prices sow doubts over the global growth outlook, Halpenny said.

The vast scale of U.S. stimulus led Goldman Sachs analysts and others last year to voice fears that it could “debase” the dollar and knock it off its perch as the leading global reserve currency. However, many experts believe those fears are premature, and for now “king dollar” still rules the roost. It is by far the most traded currency and accounts for about 60% of global foreign exchange reserves.

The U.S. economy meanwhile has bounced back strongly and is already bigger than it was before the pandemic.

But the crucial driver of the dollar’s turnaround has been the more hawkish monetary policy outlook adopted by the Federal Reserve since June that has driven Treasury yields higher. This in turn attracted investment flows to the U.S., strengthening the dollar.

Friday’s disappointing U.S. job figures did little to shake the market’s view that the Fed will start tapering its bond-buying program as early as November.

That, too, is expected to add further support to the dollar.