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Today Market

21 Apr 2018

The Dollar Index Explained

The United States “Dollar”

The United States dollar (sign$codeUSD; also abbreviated US$ and referred to as the dollarU.S. dollar, or American dollar) is the official currency of the United States and its insular territories per the United States Constitution since 1792. For most practical purposes, it is divided into 100 smaller cent (¢) units, but officially it can be divided into 1000 mills (). The circulating paper money consists of Federal Reserve Notes that are denominated in United States dollars (12 U.S.C. § 418).

Since the suspension in 1971 of convertibility of paper U.S. currency into any precious metal, the U.S. dollar is, de factofiat money. As it is the most used in international transactions, the U.S. dollar is the world's primary reserve currency. Several countries use it as their official currency, and in many others it is the de facto currency. Besides the United States, it is also used as the sole currency in two British Overseas Territories in the Caribbean: the British Virgin Islands and Turks and Caicos Islands. A few countries use the Federal Reserve Notes for paper money, while still minting their own coins, or also accept U.S. dollar coins (such as the Susan B. Anthony dollar). As of September 20, 2017, there were approximately $1.58 trillion in circulation, of which $1.53 trillion was in Federal Reserve notes (the remaining $50 billion is in the form of coins)       Source: Federal Reserve Bank of US, Wikipedia



Hedgerow Explains Dollar Index in Foreign Exchange Market.

The U.S. Dollar Index tracks the strength of the dollar against a basket of major currencies. The Dollar Index abbreviated as (DXY) originally was developed by the U.S. Federal Reserve in 1973 to provide an external bilateral trade-weighted average value of the U.S. dollar against global currencies. U.S. Dollar Index goes up when the U.S. dollar gains "strength" (value), compared to other currencies. The following six currencies are used to calculate the index:

Euro (EUR) 57.6% weight 
Japanese yen (JPY) 13.6% weight 
Pound sterling (GBP) 11.9% weight 
Canadian dollar (CAD) 9.1% weight 
Swedish krona (SEK) 4.2% weight 
Swiss franc (CHF) 3.6% weight