The U.S. Dollar Index is a geometrically average of six currencies weighted against the U.S. dollar. The Federal Reserve created it in 1973, and the ICE USDX index is the trading vehicle. The index contains six currencies: the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc. The euro replaced five European currencies – the Deutsch Mark, the French franc, the Italian lira, the Dutch guilder, and the Belgian franc.
Percentage Weights:
| Currency | Weight |
| Euro (EUR) | 0.576 |
| Japanese Yen (JPY) | 0.136 |
| British Pound (GBP) | 0.119 |
| Canadian Pound (CAD) | 0.091 |
| Swedish Krona (SEK) | 0.042 |
| Swiss Franc (CHF) | 0.036 |
Before the euro the weightings of five historical currencies were: Deutsch Mark (DEM) = 20.8%; French franc (FRF) = 13.1%; Italian lira (ITL) = 9.0%; Dutch guilder (NLG) = 8.3%; and Belgium franc (BEF) = 6.4%
The formula:
U.S. DX = (50.14348112) X (EUR/USD)-0.576 X (USD/JPY)0.136 X (GBP/USD)-0.119 X (USD/CAD)0.091 X (USD/SEK)0.042 X (USD/CHF)0.036
In the formula the value of the ‘power’ is positive if the U.S. dollar is the base currency within the pair (JPY, CAD, SEK, and CHF) and the value is negative when it is not (EUR and GBP).
Reuters calculates the dollar index value in real-time approximately every 15 seconds from a multi-contributor feed of the spot prices.
Note:
The Federal Reserve’s Real Trade Weighted U.S. Dollar Index changes annually to reflect the prior year’s development. It was introduced in 1998 primarily to keep pace with new developments in U.S. trade. Its basket of currencies includes more than 25 currencies from developed and developing nations. The index is computed as a geometric mean of the bilateral exchange rates of the included currencies. According to Intercontinental Exchange, its USDX index matches closely with the trade-weighted U.S. dollar index.
Source: The ICE U.S. Dollar Index.
