The U.S. Dollar Index (USDX) is a relative measure of the U.S. dollars (USD) strength against a basket of six influential currencies, including the Euro, Pound, Yen, Canadian Dollar, Swedish Korner, and Swiss Franc. The index was created in 1973, but remains useful to this day. The USDX can be used as a proxy for the health of the U.S. economy and traders can use it to speculate on the dollar’s change in value or as a hedge against currency exposure elsewhere. The index started in 1973 with a base of 100, and values since then are relative to this base. It was established shortly after the Bretton Woods Agreement was dissolved. As part of the agreement, participating countries settled their balances in U.S. dollars (which was used as the reserve currency), while the USD was fully convertible to gold at a rate of $35/ounce.
The U.S. Dollar Index has risen and fallen sharply throughout its history. Over the last several years, the U.S. dollar index has been relatively rangebound between 90 and 110. For more info on how we might use your data, see our privacy notice and access policy and privacy webpage. Open a free, no-risk demo account to stay on top of commodity movement and important events. The percentage of IG client accounts with positions in this market that are currently long or short. When the U.S. dollar is used as the base currency in the example above, the exponent’s value is positive, such as with the Japanese Yen, Canadian Dollar, Swedish Krona and Swiss France.
How Do You Calculate the USDX Index Price?
We are thrilled to introduce our brand-new US options and futures account, brought to you in partnership with our friends at tastytrade. We are an independent, advertising-supported comparison service. There are several popular exchange-traded funds (ETFs) that track the USDX. The Invesco DB US Dollar Index Bullish (UUP) invests in U.S. UUP has more than $2 billion in assets under management and is extremely liquid, averaging more than 4.1 million shares of daily trading volume. The higher interest rates rise, the more demand there is for U.S. dollars from foreign investors, and that applies further upward pressure on the USDX.
- Dollar “pairs” at the same time, you would trade the index, which would rise and fall in line with the overall sentiment regarding the U.S.
- Tech stocks have the largest overall exposure to international markets of any S&P 500 market sector, with overseas revenue representing 59% of total sales, according to Goldman.
- A strong dollar means other global currencies have been relatively weak, which Lynch says exacerbates inflationary pressures and financial market volatility.
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It is likely in forex surowce indeksy etf the future that currencies such as the Chinese yuan (CNY) and Mexican peso (MXN) will supplant other currencies in the index due to China and Mexico being major trading partners with the U.S. Spread bet and trade CFDs with IG to take advantage of both rising and falling prices. Alternatively, buy and sell shares and ETFs with our investment offering. Mercedes Barba is a seasoned editorial leader and video producer, with an Emmy nomination to her credit.
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When the crypto exchange platform trading engine white label ready U.S. dollar is the quoted currency, the exponent’s value will be negative such as with the Euro and British Pound. The Fed’s top priority in 2022 has been bringing down inflation from multi-decade highs, and its best weapon has been raising interest rates. The Fed has already raised the fed funds rate to a range between 3% and 3.25%.
The appreciation and depreciation results are a factor of the time period in question.
Dollar “pairs” at the same time, you would trade the index, which would rise and fall in line with the overall sentiment regarding the U.S. Two ETFs here are the WisdomTree Bloomberg US Dollar Bullish ETF (USDU) and the Invesco DB US Dollar Index Bullish Fund (UUP). “Foreign currency conversion can have a positive or negative effect on operating results. Now, the dollar index is very elevated and will ultimately serve as a headwind for overseas business of U.S. corporations,” Bevins says. “Until dollar strength abates, we fail to see the catalyst for a sustainable recovery in global risk assets,” Lynch says. Asher Rogovy, chief investment officer at Magnifina, says the USDX also has some shortcomings that investors should understand.
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The strength of the dollar can be considered a temperature reading of U.S. economic performance, especially regarding exports. The greater the level of exports, the higher the demand for U.S. dollars to purchase American goods. Tech stocks have the largest overall exposure to international markets of any S&P 500 market sector, with overseas revenue representing 59% of total sales, according to Goldman. Semiconductor company Qualcomm (QCOM) generates nearly all—96%—of its revenue internationally, while Facebook parent Meta Platforms (META) and Google parent Alphabet (GOOGL) generate more than half of their revenue overseas.
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You should familiarise yourself with these risks before trading on margin. Options and futures are complex instruments which come with a high risk of losing money rapidly due to leverage. Before you invest, you should consider whether you understand how options and futures work, the risks of trading these instruments and whether you can afford to lose more than your original investment. Futures allow traders to hedge their accounts against currency risk and fluctuation in the U.S. Dollar or to simply wager that the index will move in one direction or the other.
Since 1985, the dollar index has been calculated and maintained by Intercontinental Exchange (ICE). The strong dollar has been getting a lot of attention lately. Some U.S. companies are blaming the strong U.S. dollar for lackluster earnings, while economists say it’s helping the Federal Reserve’s ongoing fight against high inflation. Similarly, if the index is currently 80, falling 20 from its initial value, that implies that it has depreciated 20%.
News & World Report forex trading strategies and a regular contributor for Forbes Advisor and USA Today. Traders should make sure they fully understand how these derivative contracts work and the risks involved before they buy. Goldman Sachs estimates S&P 500 companies generate about 29% of their total revenue from outside the U.S. Not surprisingly, analysts have tamped down S&P 500 revenue growth estimates for 2023. According to Yardeni Research, the consensus estimate for the fourth quarter is +9%.
The exchange also offers USDX options contracts with six different expiration dates, ranging from one month to one year in the future. The U.S. Dollar Index – abbreviated USDX – is the value of the U.S. dollar measured against a group of six foreign currencies. Just as a stock index measures the value of a basket of securities, the U.S. Dollar Index expresses the value of the dollar in relation to a basket of currencies. As the dollar gains strength, the index goes up and vice versa. The index is affected by macroeconomic factors, including inflation/deflation in the dollar and foreign currencies included in the comparable basket, as well as recessions and economic growth in those countries.