USD Index (DXY)
The US Dollar Index (DXY) is a measure of the value of the US dollar relative to a basket of six major foreign currencies — the Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona, and Swiss Franc — with the Euro receiving the heaviest weighting.
The DXY was established in 1973, shortly after the Bretton Woods system of fixed exchange rates collapsed. Its base value was set at 100 at inception, meaning a DXY reading above 100 indicates the dollar is stronger than its 1973 level and below 100 indicates it is weaker. ICE Futures US trades DXY futures contracts, providing a liquid vehicle for expressing directional views on the dollar or hedging dollar exposure.
The Euro is by far the largest component of the DXY, with a weighting of approximately 57.6%, reflecting the fact that Europe is the United States' largest trading partner bloc. The Japanese yen follows at roughly 13.6%, with the British pound at 11.9%, the Canadian dollar at 9.1%, the Swedish krona at 4.2%, and the Swiss franc at 3.6%. The heavy Euro weighting means the DXY is largely a EUR/USD proxy — a rising EUR/USD (stronger Euro, weaker dollar) will usually push the DXY lower.
Because of this composition, the DXY has limitations as a comprehensive measure of dollar strength. It does not include the Chinese yuan, Korean won, Mexican peso, or other currencies that are major US trading partners, particularly as Asia and Latin America have grown as shares of global trade. The Federal Reserve publishes its own broader dollar indices — the Trade-Weighted Dollar Index — that incorporate a wider basket, though the DXY remains the most widely quoted market shorthand.
The dollar's movements affect US financial markets in multiple ways. A stronger dollar is generally negative for commodity prices (most commodities are priced in dollars; a stronger dollar makes them more expensive for non-dollar buyers, reducing demand) and for earnings of US multinationals (international revenues translate back into fewer dollars). A weaker dollar is broadly supportive for emerging market assets, which carry debt denominated in dollars — a weaker dollar reduces the real debt burden for those economies.
The DXY also serves as a broad risk sentiment indicator. During periods of global financial stress, the dollar typically strengthens as investors seek safe-haven liquidity — dollar-denominated assets, particularly US Treasury bills, are the world's premier safe-haven instruments. This dollar-strengthens-in-risk-off dynamic has been a consistent feature of major market dislocations, including 2008, 2020, and periods of emerging market crises.