How the USDX affects the Dollar
A Wealth of Knowledge
The U.S. Dollar Index simply measures how the U.S Dollar is performing against many other currencies/Basket of foreign currencies. These currencies with which the US Dollar is compared or measured against are called or referred to as the "U.S rade partners". The symbol for the dollar index is quoted as either "USDX" or "DYX". It is the index that measures and reflects the strength and weakness of the dollar as a currency. It is obvious that one cannot sum up nor conclude that the USD is weak simply by looking at the USD/JPY chart. That alone does not give one a weighted piece of data. As If the USD/JPY chart is dropping it could be that the JPY is strengthening and not that the USD is weakening. So the Dollar index gives one the trend in time to show or indicate to one how the dollar has been performing in the past x amount of days or months. An upward moving trend will be indicative of a strong Dollar. In a case where the dollar index is making lower highs and lower lows. In other words, the chart shows characteristics of a downtrend. This could be a reflection of how the dollar is performing economically. One may also want to look at the strength of the trend as well. THere are long-term trends and short-term trends. There are major trendlines and inner trendlines all which serve to aid one in quantifying. The index is currently designed, maintained, and published by the ICE Futures U.S., Inc.
It is a weighted geometric mean of the dollar's value relative to other select 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 USDX goes up when the U.S. dollar gains "strength" (value) when compared to other currencies.
USDX started in March 1973, soon after the dismantling of the Bretton Woods system. At its start, the value of the U.S. Dollar Index was 100.000. It has since traded as high as 164.7200 in February 1985, and as low as 70.698 on March 16, 2008.
The make up of the "basket" has been altered only once, when several European currencies were subsumed by the euro at the start of 1999. The makeup of the "basket" is overdue for revision as China, Mexico, South Korea and Brazil are major trading partners presently which are not part of the index whereas Sweden and Switzerland are continuing as part of the index.
USDX is updated whenever U.S. Dollar markets are open, which is from Sunday evening New York City local time (early Monday morning Asia time) for 24 hours a day to late Friday afternoon New York City local time.
USDX can be traded as a futures contract on the ICE exchange. It is also available in exchange-traded funds (ETFs), options and mutual funds.