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The U.S. Dollar Index (USDX, DXY, DX, or, informally, the "Dixie") is an index (or measure) of the value of the United States dollar relative to a basket of foreign currencies, often referred to as a basket of U.S. trade partners' currencies. The Index goes up when the U.S. dollar gains "strength" (value) when compared to other currencies.

The index is designed, maintained, and published by ICE (Intercontinental Exchange, Inc.), with the name "U.S. Dollar Index" a registered trademark.

It is a weighted geometric mean of the dollar's value relative to following 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

History

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 164.720 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. Some commentators have said that the make up 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.

Relation to Economic Growth in Developing Countries

Some scholars posit that the cyclical fluctuations in the Dollar Index, commonly referred to as the Dollar Cycle, are intricately linked to economic growth trends in developing nations. According to this hypothesis, a period of appreciation in the dollar, known as a dollar upcycle, tends to correlate with a decline in economic growth in emerging markets. Conversely, a period of depreciation, or a dollar downcycle, is associated with an increase in growth within these economies. The value of the U.S. dollar also correlates with global interest rates, particularly affecting borrowing costs for developing nations. When the USD depreciates, borrowing becomes cheaper and foreign investment increases. Conversely, USD appreciation raises interest rates, making borrowing more expensive and reducing the flow of foreign direct investment to these countries. Because most commodities are traded in U.S. dollars globally, a drop in the dollar's value often results in higher commodity prices in the local currencies of developing countries. This increase in prices can enhance local income and consumption, leading to economic growth. On the other hand, when the USD strengthens, commodity prices generally decline, which can hinder growth in these regions. Consequently, the economic development cycle in developing nations is closely linked to the cycle of commodity prices, which is driven by fluctuations in the USD.

Trade-weighted USD Index

The trade-weighted US dollar index is a currency index created by the Federal Reserve to measure the exchange rate of the United States dollar compared to the nations that it trades with the most, the more trade a country has with the United States the more that exchange rate weighs on the index. The index was created in 1998 during the creation of the Euro.

Quotes

ICE provides live feeds for Dow Futures that appear on Bloomberg.com and CNN Money. 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.

Calculation

The U.S. Dollar Index is calculated with this formula: USDX = 50.14348112 × EURUSD × USDJPY × GBPUSD × USDCAD × USDSEK × USDCHF

Trading

US Dollar Index futures are traded for 21 hours a day on the ICE platform with futures having a March/June/September/December quarterly expiration cycle. It is also available indirectly in exchange-traded funds (ETFs), options, contracts for difference and mutual funds.

See also

• Trade-weighted US dollar index
• Special drawing rights
• Dow Jones FXCM Dollar Index
• Wall Street Journal Dollar Index
• 1976 sterling crisis
• Exchange rate regime

References

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2. "US Dollar Index Hits 12-Year High As ECB Unveils €1 Trillion Stimulus". FXTimes. Archived from the original on August 11, 2016. Retrieved March 23, 2015.
3. "US Dollar Index". FXStreet. Archived from the original on April 4, 2013. Retrieved March 23, 2013.
4. "U.S. Dollar Futures". Archived from the original on July 15, 2017. Retrieved July 22, 2017. The U.S. Dollar Index, together with all rights, title and interest in and related to the U.S. Dollar Index, including all content included therein (including, without limitation, its formulation, components, values, weightings and methods of calculation), and all related intellectual property and property rights, is the exclusive property of ICE Futures U.S., Inc.
5. United States Patent and Trademark Office. "Trademark Search, Serial Number 74350026". Archived from the original on April 4, 2013. Retrieved July 22, 2017.
6. "US Dollar Index®, What It Is, and Its History". Archived from the original on March 24, 2019. Retrieved March 24, 2019.
7. "The 1976 currency crisis". April 26, 2016. Archived from the original on June 25, 2022. Retrieved July 20, 2022.
8. Hung, Ho-fung; Liu, Mingtang (March 1, 2022). "The Dollar Cycle of International Development, 1973–2017" (PDF). Studies in Comparative International Development. 57 (1): 1–35. doi:10.1007/s12116-021-09346-5. ISSN 1936-6167. Archived from the original on September 21, 2021.
9. "Tracking the global dollar cycle". CEPR. March 29, 2023. Retrieved August 31, 2024.
10. "Spillover Notes Volume 2016 Issue 002: Spillovers from Dollar Appreciation (2016)". IMF eLibrary. Retrieved August 29, 2024.
11. Druck, Pablo; Magud, Nicolas E.; Mariscal, Rodrigo (January 1, 2018). "Collateral damage: Dollar strength and emerging markets' growth". The North American Journal of Economics and Finance. 43: 97–117. doi:10.1016/j.najef.2017.10.007. ISSN 1062-9408.
12. Harvey, David I.; Kellard, Neil M.; Madsen, Jakob B.; Wohar, Mark E. (January 1, 2017). "Long-Run Commodity Prices, Economic Growth, and Interest Rates: 17th Century to the Present Day". World Development. 89: 57–70. doi:10.1016/j.worlddev.2016.07.012. ISSN 0305-750X.
13. "Trade-Weighted Dollar Definition". Archived from the original on October 5, 2022. Retrieved October 5, 2022.
14. "U.S. Dollar Index® Contracts" (PDF). 2018. p. 2. Archived (PDF) from the original on April 1, 2021. Retrieved October 15, 2018.
15. "ICE Futures and Options". www.theice.com. Archived from the original on July 15, 2017. Retrieved January 9, 2021.

External links

• USDX Quotes

• 1973 introductions
• Economic indicators of United States currencies
• Foreign exchange market