The US Dollar has been in the limelight and not in a good way. In fact, he US dollar has not been dimmer since 22 September 2022 where it was trading at 114.42.
Currently it’s at 103.90 (9.19%) down…
But what does it all mean?
Why is the Dixie such a popular index to understand, and trade.
You see it in the news every time you turn on Bloomberg and you see it in the publications. So we might as well understand it for the next time they mention the Dixie.
IN this short article I’m going to answer the 6 most important questions, to help you understand the Dixie is, how it’s calculated and how to trade it…
1. WHAT IS IT?
The U.S. Dollar Index – DIXIE – (USDX) was first intrpduced in March 1973 and is a measure of the value of the U.S. dollar relative to a basket of foreign currencies.
2. HOW IT’S CALCULATED
The USDX is calculated by the Federal Reserve Bank of New York and is based on the exchange rates of six major currencies: the euro (EUR) – Accounts for 57.6% – ,Japanese yen (JPY), British pound (GBP), Canadian dollar (CAD), Swedish krona ( SEK ), and Swiss franc (CHF) .
3. ECONOMY GAUZE
The DIXIE is used as a barometer for the value of the US dollar to base it on the potential strength of weakness of the U.S Economy.
4. TRADED BASED ON
The USDX is traded on financial markets, and its value moves based on certain macro aspects such as: Changes in exchange rates, economic conditions, and global market trends.
5. USES
Investors and financial institutions uses the USDX is often to hedge against currency risk, as well as to speculate on changes in the value of the U.S. dollar.
6. HIGHER VERSUS LOWER VALUE
If the Dixie goes up this means the US Dollar is gaining strength against the other currencies. The more it goes up the more it appreciates which indicates a stronger US dollar – Stronger economy – more confidence in the US dollar .
If the Dixie drops, it means the US dollar is getting weaker against the other currencies in the basket for the index.
As it drops more, it depreciated which tells us the US dollar is getting weaker which means – a weaker economy and less confidence in the US dollar .
If this was interesting let me know in the comments or hit the like button and let me know what else you would like to learn about in bite size information.
Trade well, live free.
Timon
MATI Trader
