News Analysis: Is a strong U.S. dollar a downside 'surprise'?

The U.S. dollar rebounded more than half a percent early Friday after trading lower in the previous session. What does a stronger dollar mean to U.S. consumers and businesses? Does the rising dollar present threats to the country's economy?

Analysts believe the net effect of the strengthening dollar is zero, but overtime it will be slightly negative mostly because of the pressure on exporters.

The U.S. dollar climbed to a 12-year high against the euro on Wednesday as the European Central Bank added stimulus into the economy while the Federal Reserve was moving closer to the interest rates hike.

The surging dollar weighed U.S. stocks market on Friday as the Dow Jones Industrial Average dropped over 200 points in the early trading while other major indices extended losses.

"The strengthening U.S. dollar initially had traders suspecting that perhaps consumer spending, which accounts for two-thirds of the U.S. economy, would be boosted in the form of retail sales," Mark Otto, Partner/Designated Market Maker at J. Streicher & Co., told Xinhua.

It has been reported that for American consumers, the dollar's rise will be felt in lower prices for imported goods at home and cheaper trips abroad.

Americans will pay less for French wine, Italian shoes, and Belgian chocolates, said John Silva, Wells Fargo's chief economist.

However, macroeconomic data gathered from the retail sector has indicated a decline over the past 3 months, Otto said.

Retail trade sales for February were down 0.6 percent from January, well below market expectations of a 0.3-percent gain, the U.S. Commerce Department said Thursday.

The market may begin to quantify that weak retail sales will have some influence on the pace of future rate hikes, added Otto.

In the short term, the effect of the rising dollar is very little, Robert Savage, CEO of CC Track Solutions, told Xinhua. CC Track Solutions is a subsidiary of CITIC Capital Holdings Limited.

"Going forward, we may see the market once again shrug off these concerns as corporations are able to jump over the lowered hurdles in the next earnings season. This seems to be a recurring theme that traders have become accustomed to," Otto echoed.

"In the long term, the economy will slow down a little bit," Savage said. The strengthening dollar will slow the economy because the country doesn't have much growth on the margin and exporters will face headwinds.

A wide variety of companies have reported sales declines as a result of the trend, according to the Washington Post.

"More severely impacted earnings would be from multinational corporations which account for greater than 40 percent of S&P 500 companies," Otto said. "We've already begun to see profit warnings on the next wave of earnings to be reported as well as analysts revising expectations to the downside." Endite