US Dollar Index (DXY) Guide
The US Dollar Index (DXY) measures the value of the US dollar relative to a basket of six major world currencies. It is one of the most widely followed benchmarks in forex and global macro trading.
The DXY basket includes the euro (EUR) at 57.6%, Japanese yen (JPY) at 13.6%, British pound (GBP) at 11.9%, Canadian dollar (CAD) at 9.1%, Swedish krona (SEK) at 4.2%, and Swiss franc (CHF) at 3.6%. Because the euro dominates the basket, DXY moves are closely aligned with EUR/USD — when EUR/USD rises, DXY falls, and vice versa. The index was established in 1973 with a base of 100 and has since traded from the 70s to the 120s.
Traders use DXY to gauge broad dollar strength or weakness rather than analysing a single pair. A rising DXY suggests the dollar is strengthening against most developed-market currencies, which is typically negative for commodities (priced in dollars), emerging markets, and gold. A falling DXY supports risk assets, commodities, and emerging-market currencies. DXY itself is tradeable via futures (ICE), ETFs (UUP, UDN), and CFDs.
DXY and Risk Sentiment
The dollar tends to strengthen during global risk-off events (flight to safety) and weaken during risk-on periods when investors seek higher yields elsewhere. DXY often exhibits an inverse correlation with the S&P 500 and commodity prices. Traders monitor DXY along with US Treasury yields and Fed policy expectations for a complete picture of dollar direction.
FAQs
Can I trade DXY directly?
Yes, through ICE US Dollar Index futures, ETFs like Invesco DB US Dollar Index Bullish (UUP), or forex brokers offering DXY CFDs.
Why is DXY dominated by the euro?
The DXY basket was created when the euro (via legacy currencies) was the largest trading partner of the US. The euro's 57.6% weight reflects this.
Does DXY include emerging-market currencies?
No, the DXY only includes six developed-market currencies. For broader dollar exposure, the Federal Reserve publishes trade-weighted indices that include emerging-market currencies.