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. Dollar Index expresses the value of the dollar in relation to a basket of currencies. As the dollar gains strength, the index goes up and vice versa.
The U.S. Dollar Index is owned by Intercontinental Exchange (ICE). ICE is a global exchange that handles clearing, financial data, and operates multiple markets across nine different asset classes. It also owns the trademarks for Dollar Index and USDX.
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.
How the dollar index works and what currencies are in it
The U.S. Dollar Index index is a weighted geometric average of six foreign currencies, and this index is maintained by ICE. Since the economy of each country (or group of countries) is of different size, each weighting is different. The countries included and their weights are as follows:
When the U.S. dollar is used as the base currency in the example above, the exponent’s value is positive, such as with the Japanese Yen, Canadian Dollar, Swedish Krona and Swiss France. When the U.S. dollar is the quoted currency, the exponent’s value will be negative such as with the Euro and British Pound. The result gives you the value of the USDX index.
Many factors will affect how the USDX moves. 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.
History of the U.S. Dollar Index
Before the U.S. Dollar Index was established by the Federal Reserve in 1973, the U.S. dollar was pegged to the price of physical gold, and the world’s currencies accordingly against the dollar. This system was facilitated by the 1944 Bretton Woods Agreement in which major world leaders agreed to physical gold as the basis for U.S. dollars, and then weighted the world’s other currencies.
Then-U.S. President Richard Nixon effectively ended this agreement in the early 1970s when he announced the value of the dollar would no longer be based on gold. From there, countries were free to “float” their currencies and allow markets to determine their value.
To track the value of the dollar in this new world, the Federal Reserve set up the U.S. Dollar Index.
How to invest in the U.S. Dollar Index
Investors can trade the U.S. Dollar Index in a few ways.
One way is to trade the USDX through ETFs or mutual funds. Rather than buying or selling several U.S. Dollar “pairs” at the same time, you would trade the index, which would rise and fall in line with the overall sentiment regarding the U.S. Dollar. Two ETFs here are the WisdomTree Bloomberg US Dollar Bullish ETF (USDU) and the Invesco DB US Dollar Index Bullish Fund (UUP).
Investors can also trade USDX futures. 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. USDX futures trade for 21 hours a day through ICE. 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.
Investors can also buy and sell options on ETFs that track the index, giving them a leveraged way to profit on price changes in the ETF.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
The U.S. Dollar Index (USDX, DXY, DX, or, informally, the "Dixie") is an index (or measure) of the value of the United States dollar relative to a basket of foreign currencies, often referred to as a basket of U.S. trade partners' currencies.
https://en.wikipedia.org › wiki › U.S._Dollar_Index
or DXY measures the performance of the dollar against a basket of other currencies including EUR, JPY, GBP, CAD, CHF and SEK. The EUR is, by far, the largest component of the index, making up 57.6% of the basket followed by JPY (13.6%), GBP (11.9%), CAD (9.1%), SEK (4.2%), and CHF (3.6%).
The current value of U.S. Dollar Index is 101.281 USD — it has fallen by −0.43% in the past 24 hours. Track the index more closely on the U.S. Dollar Index chart.
A strong dollar is good for the American economy. Not only does a strong dollar mean that there is a healthy demand for American-made goods and services, but, perhaps more important, it's also a show of confidence in the U.S. government and financial institutions.
To trade the U.S. Dollar Index (DXY), you'll need to open an account with a derivatives provider or a futures broker. Like other indices, there isn't a physical underlying market to buy and sell, so you'll need to use derivatives products to take your position.
The Kuwaiti Dinar is renowned as the strongest currency in the world. Introduced in 1961, it has maintained a commanding presence due to Kuwait's substantial oil reserves, which account for a significant portion of its economic output.
It's backed by the government that issues it. The value of fiat money is derived from the relationship between supply and demand and the stability of the issuing government rather than the worth of a commodity backing it.
What Does the Dollar Index Tell You? The dollar index tracks the relative value of the U.S. dollar against a basket of important world currencies. If the index is rising, it means that the dollar is strengthening against the basket - and vice-versa.
Monthly USD exchange rate against currency of 55 economies in Big Mac Index 2024. One United States dollar was worth over 15,000 Indonesian rupiah in March 2024, the highest value in a comparison of over 50 different currencies worldwide.
Travel Bargain Hunting?Where the Dollar Is Strong Now
1 USD = 19.31 Mexican pesos (2019) The dollar goes a long way south of the border right now, meaning that hotel bargains are easy to find and you can budget for gluttonous meals in the land of mole and tortas. ...
The US Dollar Index is a leading benchmark for the international value of the US dollar and the world's most widely-recognized, publicly-traded currency index. The US Dollar index measures the value of the U.S. dollar relative to a basket of top 6 currencies: EUR, JPY, GBP, CHF, CAD and SEK.
Positively, a rising dollar is cutting import prices, keeping a check on inflation. While the U.S. unemployment remains low, limiting capacity to absorb extra demand without generating some inflation, a higher dollar may effectively transfer demand from the U.S. economy to economies globally.
Some of the countries where a dollar is worth the most money include Mexico, Peru, Chile, and Colombia. It's possible to exchange dollars for local currency in these countries at favorable exchange rates.
The USD (United States dollar) is the official currency of the United States of America. The United States dollar, or U.S. dollar, is made up of 100 cents. It is represented by the symbol $ or US$ to differentiate it from other dollar-based currencies.
Chief among those reasons is the strength of the US economy. Despite high interest rates, the US economy is doing pretty well, supporting US stocks. And the rate cuts that we are likely to see within the next 12 months should not erode the yield on dollar bonds too far either.
The index dropped to less than 118 as recently as July 2023 before reaching a 2023 peak of more than 124.00 in late October 2023. The dollar, as measured in the index, again fell below 120 in December 2023 but hovered in the 125 range by mid-2024, representing another dollar rally.
The United States Dollar is expected to trade at 102.02 by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate it to trade at 102.92 in 12 months time.
Introduction: My name is Rueben Jacobs, I am a cooperative, beautiful, kind, comfortable, glamorous, open, magnificent person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.