Trade-Weighted Dollar (Broad)

What Is the DXY?

The US Dollar Index (ticker: DXY) measures the value of the US dollar against a basket of six major currencies: the Euro (57.6% weight), Japanese Yen (13.6%), British Pound (11.9%), Canadian Dollar (9.1%), Swedish Krona (4.2%), and Swiss Franc (3.6%). The index was created in 1973 when the Bretton Woods gold standard collapsed, with a base value of 100.

Why DXY Matters

The dollar is the world's reserve currency — the primary medium for global trade, debt contracts, and central bank reserves. DXY is the fastest-read on whether the dollar is strengthening or weakening globally, with massive knock-on effects:

- **Commodities**: Most commodities are priced in USD. Dollar up → commodity prices down (in USD terms), and vice versa - **Emerging markets**: Countries with USD-denominated debt suffer when DXY rises — repayment becomes more expensive in local currency - **US multinationals**: A strong dollar reduces the USD value of overseas earnings - **Gold**: Persistent strong inverse correlation with gold (which is priced in USD) - **Global liquidity**: Dollar strength tightens global financial conditions by raising the cost of USD funding for all non-US borrowers

Key DXY Levels

- **Base (1973)**: 100 - **Peak (1985)**: ~165 — the Plaza Accord was needed to weaken it - **Post-GFC lows**: ~70–75 (2008 and 2011) - **2022 peak**: ~115 — highest since 2002 - **Structural neutral**: ~100

DXY Limitations

The DXY is heavily EUR-dominated and doesn't include China (CNY), India (INR), or Mexico (MXN). For a broader view, use the Fed's Trade-Weighted Dollar indices (DXY Broad or DTWEXBGS).