Dollar strength posing a threat to company profits

VIDEO3:1903:19
Companies eye currency crunch surprises

As the thick of earnings season begins this week, be prepared to hear that the strong U.S. dollar is the culprit behind many disappointments.

This will be a tough year for earnings partly due to continued dollar strength, said Steve Wood, chief market strategist at Russell Investments. The dollar index, which measures the greenback against a basket of global currencies, is up more than 7 percent over the past year.

In 2015, the dollar enjoyed its fastest rise in 40 years, and it continues to gain steam against the world's other major currencies. The greenback has skyrocketed 20 percent since mid-2014 and it's now nearing parity with the euro.

Data provider S&P Capital IQ says fourth-quarter earnings from S&P 500 companies are expected to shrink by nearly 6.5 percent, potentially marking the first back-to-back decline since 2009. Some 39 companies in the S&P 500 are reporting earnings this week. Just 31 companies had reported through Friday, with 69 percent beating expectations.

Read More BofA beat tempered by concern about oil prices

Dollar strength might seem like a reflection of U.S. economic power, and it may even be good news for the pockets of American consumers. But its impact on corporate earnings and the market isn't all that great.