Pimco: Watch out, this opens up door for rate hike

The Federal Reserve sees an opportunity to raise rates in June thanks to the dollar's recent weakness, Tony Crescenzi, Pimco market strategist said Thursday.

The dollar index, which measures the greenback's performance against six major currencies, is down over 4 percent for the year.

"There are five ways to [tighten financial conditions]: Stock prices, bond yields, credit spreads, bank lending and the value of the dollar. Only the value of the dollar had been working for the Fed to keep the economy from moving too fast and pushing up prices on business services over time," Crescenzi told CNBC's "Squawk on the Street."

"This opens the door for a hike in June, if the weakness in the dollar persists," Crescenzi said.

On Thursday, the yen gained nearly 2 percent against the dollar and hit a 17-month high.

Dollar/yen in 2016Source: FactSet

"That was a big technical level broken. It's all related to the fundamentals [like] the idea that the Fed won't be raising rates as fast as people thought, and perhaps that Japan won't be cutting rates further into negative territory," Crescenzi said.

The chances for a Fed rate hike in June are 20 percent, according to the CME Group's FedWatch tool.