DXY

An index measuring the value of the United States dollar relative to a basket of major foreign currencies.

The U.S. Dollar Index (DXY) is a benchmark index that measures the value of the United States dollar relative to a basket of six major foreign currencies. These currencies include the Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona, and Swiss Franc. The index is heavily weighted toward the Euro, which makes up over 57% of the basket's total value, meaning fluctuations in the Eurozone economy have a disproportionate impact on the index. Calculated in real time, the DXY is structured as a geometric weighted average. It compares the current value of the dollar against a base value of 100.00, which was established in March 1973 when major nations abandoned fixed exchange rates in favor of floating rates. A DXY reading of 105, for example, indicates that the dollar has appreciated by 5% relative to the basket since the base period. Investors monitor the DXY closely because the strength of the U.S. dollar influences global liquidity, corporate earnings, and commodity prices. A rising DXY indicates a strong dollar, which can hurt U.S. multinational companies because their foreign sales become less valuable when converted back into dollars. Conversely, a falling DXY makes U.S. exports more competitive abroad and generally supports commodity prices, which are typically priced in dollars globally.

If the DXY is trading at 100.00 and rises to 104.50, the U.S. dollar has strengthened by 4.5% against the weighted basket of foreign currencies. This is calculated as: (104.50 - 100.00) / 100.00 = 0.045, or 4.5%.