The U.S. Dollar Index (USDX) is a relative measure of the U.S. dollars (USD) strength against a basket of six influential currencies, including the Euro, Pound, Yen, Canadian Dollar, Swedish Korner, and Swiss Franc. The USDX can be used as a proxy for the health of the U.S. economy and traders can use it to speculate on the dollar’s change in value or as a hedge against currency exposure elsewhere. The USDX is based on a basket of six currencies with different weightings (see above).

  1. It also is the parent company of the well-known New York Stock Exchange.
  2. Investors can use the index to hedge general currency moves or speculate.
  3. An overvaluation of the USD led to concerns over the exchange rates and their link to the way in which gold was priced.
  4. If you’ve traded stocks, you’re probably familiar with all the indices available such as the Dow Jones Industrial Average (DJIA), NASDAQ Composite Index, Russell 2000, S&P 500, Wilshire 5000, and the Nimbus 2001.

Dollar Index in 1985, ICE compiles, maintains, determines, and weights the components of the U.S. Today, the company is among the largest exchange groups in the world. The below chart shows some of the major events that affected the USDX price since 2005.

It was established shortly after the Bretton Woods Agreement was dissolved. As part of the agreement, participating countries settled their balances in U.S. dollars (which was used as the reserve currency), while the USD was fully convertible etoro review to gold at a rate of $35/ounce. The ICE U.S. Dollar Index futures contract is the only publicly available, regulated market for U.S. Dollar Index trading allowing virtually round-the-clock access to futures traders around the world.

What Affects the Price of the USD Index?

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). These financial products currently trade on the New York Board of Trade. Investors can use the index to hedge general currency moves or speculate. The index is also available indirectly as part of exchange-traded funds (ETFs) or mutual funds. An index value of 120 suggests that the U.S. dollar has appreciated 20% versus the basket of currencies over the time period in question.

U.S. Dollar Index

It is likely in the future that currencies such as the Chinese yuan (CNY) and Mexican peso (MXN) will supplant other currencies in the index due to China and Mexico being major trading partners with the U.S. 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. The DXY measures the strength of the US dollar against six other major currencies, such as the EUR, SEK, CHF, JPY, GBP, and CAD. The dollar index is the benchmark index for the performance of the world reserve currency.

What is DXY?

The US Dollar Index can be traded using futures and options or, where permitted, spread betting and CFD trading can also be used to speculate on whether the USDX will go up or down in price. Read more on how to trade US Dollar Index for technical strategies and tips. The USDX uses a fixed weighting scheme based on exchange rates in 1973 that heavily weights the euro. As a result, expect to see big moves in the fund in response to euro movements. In the coming years, it is likely currencies will be replaced as the index strives to represent major U.S. trading partners.

DXY Example in trading

This is why the ICE U.S. Dollar Index (USDX) futures contract is considered the leading benchmark for the international value of the U.S. dollar and the world’s most widely recognized traded currency index. ICE operates 13 regulated exchanges, including ICE xm group review futures and OTC exchanges in the US, Canada, Europe, and Singapore. It also is the parent company of the well-known New York Stock Exchange. The US Dollar Index was started by the Federal Reserve in 1973 and has been managed by ICE Futures US since 1985.

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 U.S. dollar index (USDX) is a measure of the value of the U.S. dollar thinkmarkets review 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). Options on the futures contracts began trading on September 3, 1986.

The U.S. dollar index allows traders to monitor the value of the USD compared to a basket of select currencies in a single transaction. It also allows them to hedge their bets against any risks with respect to the dollar. It is possible to incorporate futures or options strategies on the USDX.

Check out the latest USD Index price with our chart and follow the latest news and analysis from our DailyFX experts. The dollar index is often used as the benchmark performance indicator for the US economy, alongside the S&P 500.

The U.S. Dollar Index has risen and fallen sharply throughout its history. Over the last several years, the U.S. dollar index has been relatively rangebound between 90 and 110. The euro is, by far, the largest component of the index, making up 57.6% of the basket. The weights of the rest of the currencies in the index are JPY (13.6%), GBP (11.9%), CAD (9.1%), SEK (4.2%), and CHF (3.6%).

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