The USDX index, or the US dollar index, is a financial instrument that shows the ratio of the USD exchange rate to a portfolio of other currencies. It is considered a real indicator of USD value in the world's financial markets. The index is maintained by ICE Data Indices.
USDX includes EUR (Euro), GBP (British Pound), CHF (Swiss Franc), SEK (Swedish Krona), CAD (Canadian Dollar), and JPY (Japanese Yen). It is generally accepted that these are the national currencies of the main trading partners of the United States.
The only time the USDX rebalanced was in 1999, when the euro replaced a large part of the European currencies. Since then, US economic policy has changed significantly. As a result, Mexico and China became their main trading partners. Therefore, during the next rebalancing, some index currencies will likely be replaced by MXN (Mexican Peso) and CNY (Chinese Yuan).
The largest component of USDX is the EUR. Its share in the index portfolio is 57.6%. Next, come JPY (13.6%), GBP (11.9%), CAD (9.1%), and SEK (4.2%). With a share of only 3.6%, CHF has the least impact on the index.
The USDX value largely depends on the macroeconomic factors of the countries whose currencies are represented in the index. First of all, this is the level of inflation, indicators of economic growth, changes in the base interest rates of the Central Bank, and political stability. Since the USDX weighting system is more dependent on the euro, traders should pay special attention to the change in the EUR, as well as the data of the EU countries.
Risk warning: Trading in FX and CFDs entails high risk of losing capital.
