USDX

The USDX, or U.S. Dollar Index, is a financial instrument that assesses the value of the U.S. dollar in comparison to a selection of major foreign currencies. It operates as a weighted index, meaning that each currency in the basket is given a specific weight based on its significance in global trade and finance.

The USDX is frequently utilized by traders, investors, and analysts to evaluate the overall strength of the U.S. dollar. Established in 1973, it has a base value of 100.

The currency basket comprises 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 change over time as global economic conditions shift. The index has fluctuated, moving above or below 100, which reflects the relative strength or weakness of the U.S. dollar against the other currencies in the basket.

A higher USDX signifies a stronger U.S. dollar in relation to the other six currencies, while a lower USDX indicates a weaker dollar. The USDX is often regarded as an indicator of the strength of the U.S. economy.

When the U.S. economy is robust, the USDX typically rises, as investors are more inclined to invest in U.S. assets. Conversely, when the U.S. economy is weak, the USDX usually declines, leading investors to favor assets from other countries.

Additionally, businesses use the USDX to inform their pricing and hedging strategies. When the USDX is high, companies that export goods and services may need to increase their prices, as their offerings become more expensive for foreign buyers. On the other hand, businesses that import goods and services may benefit from a high USDX, as their costs will be reduced.