What Is the U.S. Dollar Index?

U.S. Dollar Index


The U.S. Dollar Index is a market index benchmark used to measure the value of the U.S. dollar relative to other widely-traded international currencies.

The Federal Reserve established the dollar index in 1973 to track the value of the U.S. dollar. Two years earlier, President Richard Nixon had abandoned the gold standard, which allowed the value of the dollar to float freely in foreign exchange (forex) markets.

Since 1985, the dollar index has been calculated and maintained by Intercontinental Exchange (ICE).

The Dollar Index Formula


The formula for calculating the value of the U.S. Dollar Index includes the dollar’s relative value compared to a basket of foreign currencies.

Today, the basket includes just six currencies: the euro (EUR), Japanese yen (JPY), British pound (GBP), Canadian dollar (CAD), Swedish krona (SEK), and Swiss franc (CHF).

ICE currently uses the following formula to calculate the value of the USDX:

The initial value of the USDX was 100 but fluctuated as high as 163.83 in March 1985 and as low as 71.58 in April 2008.

 

 

 

source- Forbes advisor

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