How the U.S. Dollar Index Measures the Dollar Against a Currency Basket

Summary

The document describes the U.S. Dollar Index, also known as USDX or DXY, as a measure of the U.S. dollar’s value relative to a basket of foreign currencies. It explains the index’s direction: it rises when the dollar strengthens against the basket. ICE maintains and publishes the index.

The index uses a weighted geometric mean of six currencies. The euro has the largest stated weight, followed by the Japanese yen, pound sterling, Canadian dollar, Swedish krona, and Swiss franc. This composition means the index reflects movements against those currencies in fixed proportions, rather than against every U.S. trading partner equally. The document provides a basic definition and the stated currency weights, but no calculation formula, historical analysis, trading method, or discussion of limitations. Its useful contribution is as a reference for interpreting what the index represents and which exchange rates contribute most to it.

Key ideas

• The U.S. Dollar Index measures the dollar against a basket of six currencies.
• A rising index indicates that the dollar has strengthened relative to the basket.
• The index is calculated as a weighted geometric mean.
• The euro has the largest stated share of the basket, with the yen and pound next.
• The index description does not provide trading guidance or historical performance evidence.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.