What is the US Dollar Index (USDX)?

The US Dollar Index – also called USDX, DXY, DX and USD Index – is estimating the value of the United States Dollar (USD) against a weighted basket of currencies used by US trade allys. The index will rise if the Dollar strengthens against these currencies and fall if it weakens. Keep reading to learn more on the US Dollar Index, how it is calculated, and what affects it price.

You‘re probably familiar with all the indices available like, the Dow Jones Industrial Average (DJIA), NASDAQ Composite Index, Russell 2000, S&P 500, Wilshire 5000, and the Nimbus 2001. If you’ve traded stocks. Bur wait that last one is literally Harry Potters broomstick.

Ok then, if U.S. stocks have an index, the U.S. dollar cant be outdone. For currency traders, we have the U.S. Dollar Index (USDX).

To be precisely accurate, the ICE U.S. Dollar Index. The U.S. Dollar Index consists of a geometric weighted average of a basket of foreign currencies against the dollar. The US Dollar Index is important for traders both as a market in its own right and as it is an indicator of the relative strength of the US Dollar around the world.

Stay still, let‘s not sleep win over you after that super geeky definition you grab., let’s scatter it down. It‘s very close to how the stock indices work. Which is providing a general sign of the value of a basket of securities. Yes..., the “securities” as you heard, but the one we’re talking about here are other major world currencies.

The US Dollar Index Currency Basket

The U.S. Dollar Index comprise of Six(6) foreign currencies. They are the:

• Euro (EUR)

• Japanese Yen (JPY)

• British Pound (GBP)

• Canadian dollar (CAD)

• Swedish Krona (SEK)

• Swiss Franc (CHF)

Consider this practice question. If the index is made up of 6 currencies, how many countries are involved？

If you answered “6”, then youre wrong.

While If you answered “24”, youre a genius!

The euro is the official currency of 19 of the 27 member states of the European Union. Plus the other five countries (Japan, Great Britain, Canada, Sweden, and Switzerland) and their partnering currencies. And here you get 24!

It‘s apparent that 24 countries make up a tiny section of the world even so many other currencies follow the U.S. Dollar index very closely. This puts the USDX a pretty good stage and a good tool for measuring the U.S. dollar’s global strength.

Traders can trade USDX as a futures contract (DX) on the Intercontinental Exchange (ICE). USDX is available in exchange-traded funds (ETFs), contracts for difference (CFDs), and options.

ICE U.S. Dollar Index®

The ICE U.S. Dollar Index (USDX) futures contract is a leading benchmark for the international value of the US dollar and the world's most widely-recognized traded currency index. Similarly From a legal perspective, the designations “U.S. Dollar Index,” “Dollar Index” and “USDX” are trademarks and service marks of ICE Futures U.S., Inc. The U.S. Dollar Index is the exclusive property of ICE, which is also known as the Intercontinental Exchange Group.

The Intercontinental Exchange (ICE) is an American Fortune 500 company formed in 2000 that operates worldwide exchanges, clearing houses and provides mortgage technology, data and listing services. ICE operates 13 regulated exchanges, all including ICE futures and OTC exchanges in the US, Canada, Europe, and Singapore. It is also the parent company of the well-known New York Stock Exchange. Currently, the company is amid the most leading exchange groups around the world.

Hopefully now you know what “ICE U.S. Dollar Index®”, means when ever you see it. Its privately owned and trademarked. Since the inception of futures trading on the U.S. Dollar Index in 1985, ICE compiles, maintains, determines, and weights the elements of the U.S. Dollar Index. The U.S. Dollar Index can be traded as a futures contract for 21 hours a day on the ICE platform. The U.S. Dollar Index futures contract generates its liquidity directly from the spot currency market, estimated to have a turnover of over $2 trillion daily.

Futures contracts based on the U.S. Dollar Index were listed on November 20, 1985. Options on the futures contracts began trading on September 3, 1986. U.S. Dollar Index futures and options on futures are accessible solely on the ICE electronic trading platform.

The ICE U.S. Dollar Index futures contract is the only publicly available, regulated market for U.S. Dollar Index trading permitting almost round-the-clock access to futures traders around the world. Which is why the ICE U.S. Dollar Index (USDX) futures contract is considered the leading benchmark for the international value of the U.S. dollar and the worlds most widely acknowledged traded currency index.

USDX vs. DX vs. DXY

If you‘ve Googled “U.S. Dollar Index”, you might’ve seen three acronyms associated with the phrase: USDX, DX, and DXY and wondered, but have you asked “What the heck is the difference between them？!”

What is USDX？

USDX is the patronage term for the U.S. Dollar Index. You can‘t go wrong using this term if you’re talking about the original dollar index. The US Dollar Index (DXY, DX, USDX) measures the value of the United States dollar relative to a basket of other currencies.

What is DX？

The ICE Exchange symbol for the futures contract is DX, followed by the month and year code. The ICE Exchange symbol for the value of the underlying Dollar Index (a times called the cash or spot index) is also DX (without a month or year code), although different data providers may use different symbols.

What is DXY？

DXY is a popular ticker or symbol used by Bloomberg Terminal users so that index is sometimes mentioned to as the “Dixie.” DXY is more repeatedly used when referring to the dollar cash or let's say spot rate, while DX is geared more for futures traders. Although as stated already, DX can also refer to the spot rate as well. Seems misleading right？

US Dollar Index (USDX) Components

Since we now know what the basket of currencies is consists of, let‘s get back to that “geometric weighted average” part. Because not every country is the same size, it’s only fair that each is given appropriate weights when calculating the U.S. dollar index.

Check out the current weights:

With its 19 countries, euros make up a big cast of the U.S. Dollar Index.

The preceding highest is the Japanese yen, which would looks meaningful since Japan has one of the strongest economies in the world. The other four make up less than 30 percent of the USDX.

Consider this question below...

When the euro falls, which way does the U.S. Dollar Index move？

The euro create such a large portion of the U.S. Dollar Index, we can st the same time call this index the “Anti-Euro Index”.

FUN FACT: Before the creation of the euro, the original USDX contained ten currencies: the ones that are presently included (except the euro), plus the West German mark, the French franc, the Italian lira, the Dutch guilder, and the Belgium franc. The euro replaced the last five of these currencies.

Since the USDX is so steadily influenced by the euro, traders have looked for a more “balanced” dollar index.

We will cover two other U.S. dollar indexes later:

• Trade Weighted Dollar Index

• Bloomberg Dollar Spot Index

As a currency trader, you should be friendly with ALL three of them.

Is the ICE U.S. Dollar Index adjusted or rebalanced？

There are no frequently organized modifications or rebalancing of the ICE U.S. Dollar Index. The Index was adjusted only when the euro was initiated as the common currency for the European Union (EU) bloc of countries. And ICE, specifically, ICE Futures U.S., monitors the index procedure to ensure that it properly reflects the covered currencies and the FX market as normally with adjustments as and when necessary (which is like…never).

How is the U.S. Dollar Index calculated？

The ICE U.S. Dollar Index is calculated in real-time approximately every 15 seconds. This real-time calculation is assign to all data vendors. The prices of the DX futures contracts are set by the market, and reflect interest rate differentials between the respective currencies and the U.S. dollar.

Where can I get real-time prices for the ICE U.S. Dollar Index？

The real-time prices for the underlying cash U.S. Dollar Index and for futures contracts based on the U.S. Dollar Index are available from market data vendors and on WebICE (an Internet-based subscription service that provides real-time access to trading activity on the ICE trading platform). Primarily, since ICE monitors the price data, and they charge a fee for the data feed, access to a real-time fee does not come FREE!

Retarded prices for the cash U.S. Dollar Index can be found on websites such as Bloomberg, Market Watch, CNBC, WSJ, and Yahoo! Finance. And Delayed prices for ICE U.S. Dollar Index futures are available on the ICE website.