NEW YORK (TheStreet) -- How is the Federal Reserve going to react to the strong U.S. dollar? It may cause some real conflicts for voting members of the Fed's Open Market Committee, the group of officials that determine the monetary policy of America's central bank.

Over the past week, the value of the dollar has risen again, after taking a little rest from the massive increase it experienced last year.

At the close of business yesterday, it took $1.0900 to acquire one euro. On June 18, after a short decline, it took $1.1404 to acquire one euro. One year ago, you needed $1.3470 to purchase a euro.

In terms of U.S. dollar indexes, the Fed's Trade Weighted U.S. Dollar Index for Major Currencies ended on July 17 at 92.5614. On June 10, the value of the index was 89.1495.

One year ago, the U.S. dollar index against major currencies stood at 76.4775.

As one can see, there has been a very large rise in the value of the U.S. dollar in foreign exchange markets.

In this corporate earnings season, more and more large corporations are reporting an effect on financial performance. Microsoft (MSFT - Get Report), for example, pointed to the fact that revenues in the second quarter of the year were impacted by the strong dollar.

General Electric  (GE - Get Report), which has substantial overseas revenues, stated that the strong dollar also had a negative impact on its earnings. In banking, Citigroup (C - Get Report), which has a large global presence, was affected by the rise in the value of the dollar.

And these are just a few out of the many that reported lower revenues because of the dollar.

A stronger currency reduces corporate profits as the higher value of the currency cuts U.S. exports. Lower U.S. exports cut into U.S. economic growth, something that is also barely chugging along, and this slower economic growth is something that the Federal Reserve is very sensitive about. The Fed does not like the rate at which the economy is growing and would not like to see it grow any more slowly.

Thus, the value of the U.S. dollar -- as it impacts U.S. economic growth -- will be a factor in Federal Reserve policy decisions.

But this might interfere with Federal Reserve plans. Last week, Fed Chair Janet Yellen reported to Congress that the Fed was still intending to raise short-term interest rates this fall, possibly in September.

An economy that is experiencing slow economic growth may cause the Fed to delay any raise in short-term interest rates because higher short-term interest rates will result in an even stronger U.S. dollar.

But this is the short-run dilemma. In the longer run, there is another problem surfacing. The world is changing and the United States stands to cease being the hegemon of the world, especially on the economic front.

To combat this, the United States will have to work for a strong dollar and cannot count on a continued devaluation of the dollar as it has for the past 50 years. I have written several articles on this subject, the latest one appearing on June 23.

So the value of the U.S. dollar is going to be at the top of the list of concerns the Federal Reserve is going to have to deal with.

The Federal Reserve seems to realize this fact. Just this week, the White House announced its choice for a new member of the Board of Governors. Her name is Kathryn Dominguez, and she's a professor at the University of Michigan. The crucial information being released on Dominguez, as it appeared in the Wall Street Journal, is this: "Her work has focused on foreign-exchange rates and central-bank currency interventions, though she also has written and spoken on the broader economy in recent years."

Dominguez joins Fed Vice Chair Stanley Fischer, who served as the first deputy managing director of the International Monetary Fund from September 1994 through August 2001. From January 1988 to August 1990, he was the chief economist of the World Bank. And Mr. Fischer was also the governor of the Bank of Israel from 2005 through 2013.

Another member of the Board of Governors, Lael Brainard, also has experience with international financial markets. Prior to her appointment to the Board, Brainard served as Undersecretary of the U.S. Treasury Department from 2010 to 2013 and Counselor to the Secretary of the Treasury in 2009. During this time, she was the U.S. Representative to the G-20 Finance Deputies and G-7 Deputies and was a member of the Financial Stability Board. In addition, from 2001 to 2008, Brainard was Vice President and the Founding Director of the Global Economy and Development Program.

In other words, the Federal Reserve is definitely preparing itself to be on top of financial events that will take place globally, and more specifically, to stay on top of events relating to foreign-exchange markets.

It seems to me that business leaders and investors should take note of this shift in personnel. Never before have three of the seven governors of the Federal Reserve had so much experience in the world of foreign exchange.

If the Federal Reserve is preparing for a new economic era, shouldn't business leaders and investors be doing exactly the same? The world is changing!

 

  This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.