What is the US Dollar Index

?
Just as the Dow Jones Industrial Average provides a general indication of the value of the US stock
market, the US Dollar Index (USDX

! provides a general indication of the international value of the

US Dollar" Similar in man# respects to the $ederals %eserve &oard's trade(weighted index, the USDX
does this )# averaging the exchange rates )etween the US Dollar and six ma*or world currencies"
USDX = 50.14348112 EURUSD
-0.576
USDJPY
0.136

GBPUSD
-0.119
USDCAD
0.091
USDSEK
0.042
USDCHF
0.036

+hese ,- countries (,. countries of the /uro 0one plus the five other nations whose currencies are
represented in the USDX! constitute the )ulk of international trade with the United States, and have
well(developed foreign exchange markets with rates freel# determined )# market participants" In
addition, man# currencies not included in the USDX move in close correlation with those that are
included" +he USDX is computed .1 hours a da#, seven da#s a week"
2urrencies and weights used in the calculation of the USDX are the same as those used in the $ederal
%eserve &oards trade(weighted US Dollar Index"
Since the USDX is )ased onl# on indications of foreign exchange rate values, it ma# occasionall#
differ from a value calculated using other data sources"
+he USDX is calculated as a geometric weighted average of the change in six foreign currenc#
exchange rates against the US Dollar relative to 3arch ,4-5" +he USDX measures the dollar's general
value relative to a )ase of ,66"66" A 7uote of 105.50 means the dollar's value has risen 8"869 since
this )ase period"
3arch ,4-5 was chosen as a )ase period )ecause it represents a significant milestone in foreign
exchange histor# when the world's ma*or trading nations allowed their currencies to float freel# against
each other" +his agreement was reached at the Smithsonian Institution in :ashington, D2 and was a
victor# for free market theorists" +he Smithsonian agreement replaced the unsuccessful fixed rate
regime esta)lished approximatel# .8 #ears earlier at &retton :oods, ;ew <ampshire"
+he current level of the USDX reflects the average value of the dollar relative to this ,4-5 )ase period"
Since that time, the Dollar Index has traded as high as the mid(,=6's and as low as the high(-6's"
>olatilit# of this instrument is compara)le in range and varia)ilit# to a )road()ased, multi(
capitali0ation stock index future"