Illustration: Lazaro Gamio/Axios

The strength of the dollar is creeping in as a major worry for business leaders, and it's looking poised to grow stronger.

Details: The dollar index, which measures the greenback's strength against currency peers like the euro, yen and British pound, is rising toward its highest level since 2017.

Why it matters: On earnings calls so far in the first quarter, FX and currency worries, aka the dollar's strength, has been the most cited negative by S&P 500 companies.

  • A strong dollar makes U.S. exports less competitive and eats away at profits for U.S.-based multinational firms.

The big picture: The dollar also has been strengthening against the currencies of emerging countries, like China, where many American businesses generate significant revenue.

Between the lines: Companies generally don't change prices because of currency fluctuations, so a hypothetical 20-yuan Big Mac could translate to $3 when the dollar is weak, but only $2.90 when it's strong.

  • McDonald's sells over 1 billion Big Macs a year in China, so that number makes a big difference.
  • "The dollar rally is back on track as the divergence theme re-emerges," Win Thin, global head of currency strategy at Brown Brothers Harriman, wrote in a note to clients. "For EM, that has translated into broad-based losses this past week ... and we see further EM losses ahead."

Unfortunately for nervous executives, even though the Fed has paused its interest rate hiking cycle, U.S. rates are among the highest in the developed world and other central banks are taking measures likely to weaken their currencies.

  • The European Central Bank looks poised to institute more stimulus measures to support sputtering growth in Germany, Italy and Sweden.
  • Economists increasingly expect the Bank of Japan to add stimulus, according to a Bloomberg poll.
  • The Bank of England is likely on pause until a resolution is found for Brexit and the central banks of Australia and New Zealand have both been sending dovish messages, suggesting rate cuts may be coming soon.

The bottom line: Investors buy the dollar when they are worried about global growth and when U.S. economic data is strong. After weak manufacturing readings in Germany and Japan and strong U.S. retail sales and 50-year-low initial jobless claims data last week, both themes look fully in force.

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