Here are 2 ways to play the rising US dollar

The dollar has steadily risen since early May and in light of a potential Fed rate hike in June, the greenback could be heading even higher.

This leaves investors wondering how to trade a now up-trending dollar after the currency's slip in recent months.

Stifel Nicolaus portfolio manager Chad Morganlander believes that now is the time to buy long-dated U.S. Treasury bonds, especially in light of rising yields and global demand. Bond prices dove last week after the Fed's release of its April meeting minutes, driving up yields for their largest weekly gain since November. Prices and yields move inversely.

"We believe that global investors, especially institutions, are starved for yield," he said Friday on CNBC's "Power Lunch." "So effectively what they're going to do is perhaps reach for the 10-, the 20-year Treasury."

In addition, the perception that the dollar will rise could make it even more attractive for foreign investors to own U.S. bonds, as the currency would be another source of investment returns in such an environment.

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Finally, Morganlander also believes that market volatility is going to increase in light of a Fed rate hike, raising demand for U.S. Treasurys.

Alternatively, Convergex Group's chief market strategist, Nick Colas, recommends selling large-cap consumer staples in order to mitigate implications of a stronger dollar on one's stock holdings.

"Companies with a lot of internationally branded businesses [are] going to face a lot of headwind from the stronger dollar in terms of their operations overseas [and] not being able to repatriate profits back at the lower levels of a weaker dollar," he said. "Even if the group is up 3.5 percent on the year and therefore a good winner, we're seeing some selling because I think people are looking at the potential for higher rates and are worried that dividend yield stocks may not be quite as attractive."

The dollar opened Monday morning slightly higher against a basket of foreign currencies.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

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