Think of it like a scoreboard for the dollar – icm capital forex broker icm capital review icm capital information if the DXY is rising, the dollar is getting stronger versus those currencies. 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.
Just as a stock index measures the value of a basket of securities, the Virtual portfolio 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 index is affected by macroeconomic factors, including inflation/deflation in the dollar and foreign currencies in the basket, as well as recessions and economic growth in those countries.
- The contents of the basket of currencies have only changed once.
- And there have been times where bitcoin and the DXY climb at the same time.
- ICE offers dollar index futures for trading 21 hours a day on their platform.
- Traders and investors can use them to hedge general currency moves or to speculate.
- Inflation or deflation of any currency, monetary policy, geopolitical conflicts, and export/import ratios, just to name a few.
What Is the U.S. Dollar Index?
The contents of the basket of currencies have only changed once. That happened in 1999 when the newly-created supply chain and logistics technology euro replaced several European currencies previously in the index, such as Germany’s predecessor currency, the deutschmark. The index has only been updated once, in 1999, when the newly-created euro replaced the German mark, French franc, Italian lira, Dutch guilder, and Belgian franc.
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. It reached an all-time high in 1984 at nearly 165, and an all-time low of around 70 in 2007. In the years since then, the U.S. dollar index has been relatively range bound, fluctuating between 90 and 110.
DOLLAR INDEX, USDX
The U.S. dollar index is a measure of the value of the U.S. dollar relative to a basket of foreign currencies. Federal Reserve in 1973 after the dissolution of the Bretton Woods Agreement. It is now maintained by ICE Data Indices, a subsidiary of the Intercontinental Exchange (ICE). The USDX allows traders and investors to monitor the purchasing power of the U.S. dollar relative to the six currencies included in the index’s basket.
About U.S. Dollar Index
Wayne Duggan has a decade of experience covering breaking market news and providing analysis and commentary related to popular stocks. News & World Report and a regular contributor for Forbes Advisor and USA Today. Traders can also use leveraged currency ETFs to bet against weakening international currencies.
Corn, soybeans, and all three wheat markets smell of fish, for different reasons, early Thursday morning. Get how-to guides and investment ideas across crypto, stocks, metals, and more. 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. 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.
While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service. 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. The U.S. Dollar Index – abbreviated USDX – is the value of the U.S. dollar measured against a group of six foreign currencies.
FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. The index is also available to investors indirectly as part of exchange-traded funds (ETFs) and mutual funds. The USDX uses a fixed weighting scheme based on exchange rates from 1973 that heavily weights the euro. As a result, the biggest movements tend to happen in response to fluctuations of the euro. For example, currencies such as the Chinese yuan (CNY) and Mexican peso (MXN) may replace others in the index, given the significance of China and Mexico as key U.S. trading partners.
Why the DXY matters for the global economy
The index calculation is simply the weighted average of the U.S. dollar exchange rate against these currencies, normalized by an indexing factor (which is ~50.1435). The exponent figures following the currency pairs are the weightings (see above). Negative weightings indicate that the USD is the quote currency. Positive weightings indicate that the USD is the base currency. Similarly, an index value of 80, indicating a fall of 20 from its initial value, implies a 20% depreciation in strength relative to the other currencies. The appreciation and depreciation results are a factor of the time period in question.