The USDX, or U.S. Dollar Index, is a financial tool that measures the value of the U.S. dollar relative to a basket of major foreign currencies.
It is a weighted index, meaning that each currency in the basket is assigned a specific weight based on its importance in international trade and finance.
The USDX is often used by traders, investors, and analysts to gauge the overall strength of the U.S. dollar.
The USDX was created in 1973, with a base value of 100.
The basket of currencies includes the following six major currencies:
- Euro (EUR) – 57.6% weight
- Japanese Yen (JPY) – 13.6% weight
- British Pound Sterling (GBP) – 11.9% weight
- Canadian Dollar (CAD) – 9.1% weight
- Swedish Krona (SEK) – 4.2% weight
- Swiss Franc (CHF) – 3.6% weight
The weights may be subject to change over time as global economic conditions evolve.
The index has since fluctuated, rising above or falling below 100, reflecting the relative strength or weakness of the U.S. dollar compared to the other currencies in the basket.
- A higher USDX indicates that the U.S. dollar is stronger relative to the other six currencies.
- A lower USDX indicates that the U.S. dollar is weaker.
The USDX is often used as a gauge of the strength of the U.S. economy.
- When the U.S. economy is strong, the USDX tends to rise, as investors are more willing to invest in U.S. assets.
- When the U.S. economy is weak, the USDX tends to fall, as investors are more likely to invest in assets of other countries.
The USDX is also used by businesses to make decisions about pricing and hedging.
When the USDX is high, businesses that export goods and services to other countries may have to raise their prices, as their goods and services will be more expensive for foreign buyers.
Businesses that import goods and services may benefit from a high USDX, as their costs will be lower.