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Tom Lee: Watch out for the dollar

Investors should be wary of the strong U.S. dollar, Tom Lee told CNBC on Monday.

"If the dollar stays at this level, it's going to be a headwind for earnings for the rest of the year, because we know there's a translation effect on inflation and GDP. One of the things I think is uncertain is where the dollar [will be] six months from now," the Fundstrat Global Advisors founder said on "Squawk on the Street." "If investors think it will be stronger, there is going to be a headwind."

The dollar index was down 0.70 percent at 99.57 late morning Monday as the euro edged off 12-year lows against the greenback. The DXY's downward turn comes after it hit 100.27 last week, its highest levels since 2003.

"When I speak to clients, they're really focused on this Europe bond-proxy trading. The opportunity that's taking place in Europe with QE, so I think there's money flowing from the U.S. into Europe," Lee also said.

Read MoreThe Fed could put the brakes on the dollar rally

U.S. stocks were up Monday, with the Dow Jones industrial average adding more than 190 points.