Will the dollar foil the Fed's rate-hike plans?

As we again approach near-certainty of the Federal Reserve's first rate hike in over a decade, there's one thing that could put a glitch in its policy-normalization plans: The dollar.

Sheets of one dollar bills run through the printing press at the Bureau of Engraving and Printing in Washington, DC.
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Sheets of one dollar bills run through the printing press at the Bureau of Engraving and Printing in Washington, DC.

A stronger dollar dampens inflation by making our exports more expensive overseas, while driving down the cost of foreign imports for domestic consumers. That puts downward pressure on GDP (as we saw in the first quarter) and adversely affects the profits of U.S. multinationals, (as we also saw in the first quarter).

So, if Fed Vice Chair Stan Fischer thinks inflation is too low now – a justification for keeping interest-rates low -- how will he feel if the dollar rallies, oil prices fall back to their most recent lows in the $40 range and inflation expectations begin to fall, rather than rebound?

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A rising dollar serves, effectively, as a rate hike. The rough rule of thumb is that a 10-percent jump in the dollar is equal to a half-point hike in interest rates. The 20-percent rally we saw in the dollar from June 2014 to March 2015 was believed to have shaved almost a full point off of economic growth.

So, if the dollar were to accelerate now, beyond the peak reached earlier this year, it could cause the Fed to consider further delaying its first rate hike.

Plus, there's another wrinkle: Longer-term bond yields are again moving lower. That runs counter to the conditions expected for a rate hike — that economic growth is sufficiently strong, and inflation is moving toward its desired target.

Read MoreWhy the Fed really wants to raise rates

The long end of the bond market could be saying that rate hikes, in and of themselves, will weaken the economy, and thus bond yields should be lower, an outcome the Fed, I am certain, wishes to avoid.

Or, perhaps the need for high quality bonds remains high and U.S. Treasurys are the only investment meeting the need.

Needless to say, just when certainty abounds about the direction of Fed policy, new variables are introduced to keep up on our toes. So, once again, the need for vigilance is high. A strong dollar and falling bond yields may be telling the Fed a different story than it wants to hear.

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Commentary by Ron Insana, a CNBC and MSNBC contributor and the author of four books on Wall Street. He is also editor of "Insana's Market Intellgence," available at Marketfy.com. Follow him on Twitter @rinsana.