U.S. Dollar Index (USDX, DXY)

    0
    921

    Definition: What is the U.S. Dollar Index?

    The U.S. Dollar Index (USDX, DXY) is an index of the value of the dollar (USD) in comparison to selected other currencies.

    How is the U.S. Dollar Index calculated?

    The U.S. Dollar Index is the weighted geometric mean of the dollar’s value in relation to the following currencies:

    • Euro (EUR), 57.6% weight
    • Japanese yen (JPY) 13.6% weight
    • Pound sterling (GBP), 11.9% weight
    • Canadian dollar (CAD), 9.1% weight
    • Swedish krona (SEK), 4.2% weight
    • Swiss franc (CHF) 3.6% weight

    It is likely to be revised in the future as Sweden and Switzerland have become less important in the world economy than China or Brazil whose currencies are not included in the calculation at the moment.

    - Advertisement -

    What does the U.S. Dollar Index mean for traders?

    The dollar index goes up when the dollar (USD) becomes stronger in comparison to other currencies.

    How to use the U.S. Dollar Index as a confirmation of the trend direction

    Since the dollar index reflects the value of a basket of currencies relative to the dollar, it gives a more representative picture of the dollar’s strength or weakness than a single currency pair like EUR/USD.

    Many experienced traders check the U.S. Dollar Index before trading a dollar currency pair and avoid trading against the trend of the dollar index.

    How to trade the dollar index

    The U.S. Dollar Index can be traded five days per week, from Monday to Friday. It is available as a futures contract on the Intercontinental Exchange (ICE) as well as through exchange-traded funds (ETFs)options and at many brokers directly as a Contract for Difference (CFD).

    - Advertisement -