USD Index Definition. The USD or U.S. Dollar Index (USDX) is an index that determines the relative value of the United States Dollar to a basket of foreign currencies. Since currencies come in pairs that are influenced by the respective fundamentals of each country’s economy, it is difficult to measure on an overall basis whether a currency is strengthening or weakening in the forex market. This formulated “basket” of currencies comprises the weighting of six other currencies as follows:
Euro (EUR), 57.6% + Japanese Yen (JPY), 13.6% + Pound Sterling (GBP), 11.9% + Canadian Dollar (CAD), 9.1% + Swedish Krona (SEK), 4.2% + Swiss Franc (CHF) 3.6%
Tracking of this formulated USDX began in March 1973, following the dismantling of the Bretton Woods system. At its start, the value of the US Dollar Index was 100.000, and its current value can be observed in the chart below. There has only been one adjustment in the basket to arrive at the current weightings, necessitated by the introduction of the Euro in 2000. The index can actually be traded on the futures market, in exchange traded funds, or in mutual funds.
