What Is the Dollar Index (DXY)

The dollar index in five lines

The dollar index is one number for the dollar against a basket of six currencies, instead of six separate pairs. The basket is weighted: the euro is 57.6 percent of it, the yen 13.6, the pound 11.9, the Canadian dollar 9.1, the Swedish krona 4.2 and the Swiss franc 3.6, and the weights have been fixed since the euro arrived. The scale set March 1973 at 100, so a reading above 100 means the dollar buys more of the basket than it did then. The index rising is the dollar rising against the six, and because the euro is more than half of it, the index is mostly the euro against the dollar upside down. It goes by DXY, USDX or simply the dollar index.

A basket of six coins

Here is the idea as a basket of six coins, each the size of its weight. The euro coin, 57.6 percent, is bigger than the other five put together; the yen, the pound and the Canadian dollar are the middle sizes, and the krona and the franc are small change. The index weighs the dollar against the whole basket at once, so a day on which only the euro moves still moves the index, by a little more than half the euro's move, while a day on which only the franc moves barely registers.

This paper is locked