The US Dollar Index (USDX) is similar to the Dow Jones Industrial Average (Dow Jones Industrial Average), which shows the comprehensive status of US stocks. The US Dollar Index shows the comprehensive value of the US dollar. An indicator of the strength of various currencies.

Unexpectedly, the U.S. dollar index does not come from CBOT or CME, but from the New York Cotton Exchange (NYCE). The New York Cotton Exchange was founded in 1870. It was initially composed of a group of cotton merchants and intermediaries. It is currently the oldest commodity exchange in New York and the most important cotton futures and options exchange in the world. In 1985, the New York Cotton Exchange established its financial department and officially entered the global financial commodity market. The first thing it launched was the U.S. dollar index futures.

The foreign currencies and weights used in USDX are the same as the U.S. Federal Reserve's U.S. Dollar Trade-Weighted Index. Because USDX is only based on the Forex quote indicator, it may vary due to the use of different data sources.

USDX is calculated with reference to the geometric average weighted value of the exchange rate changes of six currencies against the US dollar in March 1973, and its value is measured based on 100.00 points. For example, the quotation of 105.50 points refers to the Its value has increased by 5.50% since March 1973.

March 1973 was chosen as the reference point because it was a historic turning point in the foreign exchange market. From then on, major trading countries allowed their currencies to float freely against the currencies of other countries. .

The agreement, reached at the Smithsonian Institution in Washington, represents a victory for free trade theorists. The Smithsonian agreement replaced the unsuccessful fixed exchange rate system agreed at Bretton Woods in New Hampshire in 1948.

The impact of the U.S. dollar index

USDX is an indicator that comprehensively reflects the exchange rate of the U.S. dollar in the international foreign exchange market. It is used to measure the exchange rate changes of the U.S. dollar against a basket of currencies. It measures the strength of the U.S. dollar by calculating the comprehensive rate of change of the U.S. dollar and a selected basket of currencies, thereby indirectly reflecting changes in U.S. export competitiveness and import costs.

The rise in the U.S. dollar index means that the price ratio between the U.S. dollar and other currencies is rising, that is to say, the U.S. dollar is appreciating. If major international commodities are priced in U.S. dollars, the corresponding commodity prices should fall. An appreciation of the U.S. dollar is good for a country's overall economy, boosting the value of its currency and increasing its purchasing power. But it also has an impact on some industries, such as the import and export industry. Currency appreciation will increase the price of export commodities, thus affecting the export commodities of some companies. If the US dollar index falls, the opposite will be true.

The calculation principle of the US dollar index

The calculation principle of USDX futures is based on the trade settlement volume between major countries in the world and the United States, and calculates the overall value of the US dollar in a weighted manner. The level of strength and weakness, with 100 points as the dividing line between strength and weakness. After the launch of the euro on January 1, 1999, the subject matter of this futures contract was adjusted, reducing from 10 countries to 6 countries. The euro also became the most important and weighted currency, with its weight reaching 57.6%, therefore, the fluctuation of the euro has the greatest impact on the strength of USDX.

Currency Index Weight (%)

Euro 57.6

Japanese Yen 13.6

British Pound 11.9

Canada Yuan 9.1

Swedish Krona 4.2

Swiss Franc 3.6

Current USDX levels reflect the average USD relative to the 1973 base point. So far, the U.S. dollar index has risen as high as 165 points and as low as below 80 points. This change characteristic is widely compared to futures stock indexes in terms of volume and rate of change.