- May 14, 2022
- Posted by: Stratford Team
- Category: Economy
The U.S. Dollar Index is a measure of the value of the U.S. dollar against six other foreign currencies. Just as a stock index measures the value of a basket of securities relative to one another, the U.S. Dollar Index expresses the value of the dollar in relation to a “basket” of currencies. As the dollar gains strength, the index goes up and vice versa.
The strength of the dollar can be considered a temperature read of U.S. economic performance, especially regarding exports. The greater the number of exports, the higher the demand for U.S. dollars to purchase American goods.
How the Dollar Index works and what currencies are in it
The index is a geometric weighted average of six foreign currencies. Since the economy of each country (or group of countries) is of different size, each weighting is different. The countries included and their weights are as follows: