Dollar Strength the Talk of Stock Traders

Tomohiro Ohsumi | Bloomberg | Getty Images

Another rally in Japan, with the Nikkei up 2.9 percent, as the dollar reaches 101.4 yen. The Nikkei up 40 percent this year (!).

That dollar/yen moving is putting a lot of pressure on commodities today ... the dollar index is at a two-week high, with gold, silver, copper, oil, and heating oil all down 1.8 to 2.5 percent.

It's not just the yen ... the weekly jobless claims data yesterday also goosed the dollar, as did speculation that The Wall Street Journal would publish an article that the Federal Reserve was going to soon end or drastically cut back its bond purchase program (where is it?).

But things really started moving as the dollar/yen broke 100, which happened around 2 p.m. ET yesterday.

This implies we won't see zero percent interest rates indefinitely, but everyone who is convinced the Fed will stop their bond-buying program in the next few months are dreaming, seems to me.

Fed chief Ben Bernanke has repeatedly said the Fed needs to see consistent, sustained evidence that the economy was turning around. We are not seeing that.

March is bad, but April is better. That is not sustained economic recovery.

Yesterday, Chicago Fed President Charles Evans (an FOMC voter) said he wanted to see strong employment numbers through the summer before he would consider cutting purchases. Get it?

We would need three months, at least, of job growth over, say, 200,000 for the Fed to consider anything.

In one sense, it doesn't really matter if the Fed does something this year or not. Treasury yields are so low that the hurdle is very low on economic data to encourage traders to take some risk off the table.

It does imply further dollar strength.

A wider point is that the currency war is getting much more intense. We have currency intervention from New Zealand, and Australia and South Korea cut interest rates. But it has the same effect: debasing the currency. Now countries like Canada, which have strong commodities businesses, might be forced to intervene, as well.

—By CNBC's Bob Pisani