The strength of the dollar can be considered a temperature reading of U.S. economic performance, especially regarding exports. The greater the level of exports, the higher the demand for U.S. dollars to purchase American goods. The offers that appear on this site are from companies that compensate us. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.
The index is affected by macroeconomic factors, including inflation/deflation in the dollar and foreign currencies included in the comparable basket, as well as recessions and economic growth in those countries. Futures allow traders to hedge their accounts against currency risk and fluctuation in the U.S. Dollar or to simply wager that the index will move in one direction or the other. Index futures can react to both national and international economic data, as well as other reports that relate to the strength of the dollar or other currencies. The U.S. Dollar Index – abbreviated USDX – is the value of the U.S. dollar measured against a group of six foreign currencies. Just as a stock index measures the value of a basket of securities, the U.S.
Investors also use the dollar index as a litmus test for U.S. economic performance, particularly when it comes to imports and exports. The more goods the U.S. exports, the more international demand there is for U.S. dollars to purchase those goods. The USDX allows traders and liteforex review investors to monitor the purchasing power of the U.S. dollar relative to the six currencies included in the index’s basket. These financial products currently trade on the New York Board of Trade. Investors can use the index to hedge general currency moves or speculate.
- It was established shortly after the Bretton Woods Agreement was dissolved.
- The index started in 1973 with a base of 100, and values since then are relative to this base.
- It compares the value of the US Dollar against six currencies used by major US trade partners – the Euro (EUR), Japanese Yen (JPY), Pound Sterling (GBP), Canadian Dollar (CAD), Swedish Krona (SEK) and Swiss Franc (CHF).
- The index is affected by macroeconomic factors, including inflation/deflation in the dollar and foreign currencies included in the comparable basket, as well as recessions and economic growth in those countries.
The weights of the rest of the currencies in the index are JPY coinbase exchange review (13.6%), GBP (11.9%), CAD (9.1%), SEK (4.2%), and CHF (3.6%).
While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service. The US Dollar Index, also known as DXY, is used by traders seeking a measure of the value of USD against a basket of currencies used by US trade partners. The index will legacy fx opiniones rise if the Dollar strengthens against these currencies and will fall if the Dollar weakens against these currencies. Plan your technical analysis of the US Dollar Index by tracking its price in the chart and keep up with the latest market movements with news, advice pieces, and the dollar index forecast.
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The U.S. Dollar Index is a market index benchmark used to measure the value of the U.S. dollar relative to other widely-traded international currencies. The USDX is based on a basket of six currencies with different weightings (see above). The index calculation is simply the weighted average of the U.S. dollar exchange rates against these currencies, normalized by an indexing factor (which is ~50.1435). There are several popular exchange-traded funds (ETFs) that track the USDX.
How Do You Calculate the USDX Index Price?
The US Dollar Index – known as USDX, DXY, DX and USD Index – is a measure of the value of the United States Dollar (USD) against a weighted basket of currencies used by US trade partners. The index will rise if the Dollar strengthens against these currencies and fall if it weakens. Keep reading to learn more on the US Dollar Index, how it is calculated, and what affects it price. Dollar Index includes the dollar’s relative value compared to a basket of foreign currencies. Initially, it included the Japanese yen, British pound, Canadian dollar, Swedish krona, Swiss franc, West German mark, French franc, Italian lira, Dutch guilder, and Belgian franc.
U.S. Dollar Index
The contents of the basket of currencies have only been changed once since the index started when the euro replaced many European currencies previously in the index in 1999, such as Germany’s predecessor currency, the Deutschemark. Inflation or deflation of any currency, monetary policy, geopolitical conflicts, and export/import ratios, just to name a few. The U.S. Dollar is the world’s reserve currency, and as such usually maintains high demand.
The Fed’s top priority in 2022 has been bringing down inflation from multi-decade highs, and its best weapon has been raising interest rates. The Fed has already raised the fed funds rate to a range between 3% and 3.25%. In fact, the Federal Open Market Committee (FOMC) has issued three consecutive large rate hikes of 75 basis points. As a result, its calculation doesn’t include emerging market currencies, like the Mexican Peso (MXN) or commodity currencies. It also doesn’t include China’s renminbi (CNY), even though China is now the largest U.S. trading partner by a wide margin.
