CandleFocus

U.S. Dollar Index (USDX)

Candlefocus Editor
The United States Dollar Index, commonly known as the USDX or DXY, is a measure of the value of the US dollar in comparison to a basket of the six major world currencies. It was established shortly after the Bretton Woods Agreement of the 1970s, which dissolved the gold standard and allowed for greater market flexibility in currency exchanges. The index was established with a base value of 100 and the current value represents increases or decreases relative to this base.

The U.S. Dollar Index tracks the change in the value of the US dollar against a basket of six different currencies. These currencies are the euro, Swiss franc, Japanese yen, Canadian dollar, British pound, and Swedish krona. The amount represented by each currency within the basket was selected to reflect the relative importance of the currency in world markets, with the euro representing the largest portion. The value of the US Dollar Index is therefore an indication of the value of the US dollar in the market compared to these other currencies.

The US Dollar Index is widely used in the financial world to gauge the performance of the US dollar in the global market, particularly in the international trading of commodities. This index provides insight into the strength of the US dollar relative to other currencies at any given time, which is useful for evaluating the purchasing power of the US dollar. This can impact both consumer and corporate activity, and is a crucial indicator for those trading in foreign exchange markets.

The U.S. Dollar Index has great value for investors. Forex traders, particularly those dealing in currency futures, use the USDX as an important factor in their decision making process. It can also provide an indication of how markets may perform, since many investments and commodities are priced in US dollars. For example, if the U.S. Dollar Index is increasing in value, this could mean that the dollar is strengthening in world markets. And if the dollar is strong, it may make investments in commodities denominated in US dollars more attractive.

The US Dollar Index can be a great indicator for those trading in the foreign exchange market or looking to invest in commodities denominated in US dollars. By tracking the performance of the US dollar against a basket of major world currencies, traders are able to get a more comprehensive view on the performance of the US currency in global markets. As the US dollar is tied to so many different investments, the USDX is a useful tool for making informed decisions.

Glossary Index