The U.S. dollar may be losing its luster, but stock investors aren't losing much sleep over its weakness.

In fact, analysts say, its recent slide would make mega-cap industrial stocks such as Caterpillar Inc. and Boeing Co. more appealing.

Such stocks have underpinned this year's steady climb in the Dow industrial average, which on Tuesday closed in on its intraday record high of 11,750.28, hit on January 14, 2000, on hopes that the Federal Reserve would signal a pause in nearly two years of interest rate hikes.

While much of the Dow's climb has been tied to optimism about a Fed's pause, the lure of large-cap shares has also been growing as the dollar weakens.

A weaker dollar does filter back into the blue-chip stocks, which is one of the reasons the Dow is outperforming the other indices at this point, said Barry Hyman, equity market strategist at Ehrenkrantz, King, Nussbaum.

(Dollar weakness) will help the larger caps more than the smaller caps because larger caps tend to do more business overseas, and if there is a reason why the market may migrate to large cap versus small cap, it could be that reason, he added. A weaker dollar makes U.S. goods relatively less expensive for foreign buyers.

Part of the draw also stems from the fact that large-cap stocks, despite recent gains, have lagged their small-cap rivals in the past five years, making their valuations attractive.

On Wednesday, the Fed's policy-setting committee is expected to raise interest rates by another quarter-percentage point to 5 percent, which would be the 16th rate hike since June 2004. But prospects of a pause in rate hikes would add more pressure to the dollar.

Year-to-date, the Dow, an index of 30 actively traded blue-chip stocks, is up 9 percent, compared with a gain of 16 percent in the Russell 2000 index small-cap stocks. But since the end of March, large-cap stocks have been catching up with their small-cap rivals.

If you dig a little bit further down, the weaker dollar does imply that the export earnings of companies such as Caterpillar, will be helped by the decline, said Hugh Johnson, chief investment officer of Johnson Illington Advisors.

Investors buy these stocks because they are perceived by international investors to be safer, he added.

Analysts said Caterpillar, the heavy equipment maker, plane company Boeing, and major oil companies, such as Exxon Mobil Corp., stood to cash in from growing demand from expanding Indian and Chinese economies.

That prospect, they said would make such stocks more appealing to investors, who want to capitalize on dollar weakness.

But the dollar's slide won't be a boon for everyone.

Companies that stand to lose from dollar weakness include retailers with less selling exposure overseas, and those companies that would end up paying more for input raw materials.

Higher manufacturing costs due to the dollar's decline could hurt technology companies as well, but they could offset the cost drag if overseas demand for their products rose. In addition, a weaker dollar could rob some companies of their pricing power if overseas competition escalated.

Generally speaking, dollar weakness is good for U.S. companies to the extent that they're competing either through exports or through import substitutes, said Rick Campagna, portfolio manager at Provident Investment Council in Pasadena, California.

Other companies likely to benefit from a weakening dollar are consumer discretionary, consumer staples and energy firms, Henry Chip Dickson, chief U.S. strategist at Lehman Brothers, said in a research note.

According to Lehman, Standard & Poor's 500 companies <.SPX> generated 32 percent of their total sales from outside the United States last year, and 44 percent of the index's pre-tax income was attributed to operations based abroad.

Energy companies generated 51 percent of their pre-tax income from abroad, Lehman added.