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What Is the Dollar Index (DXY)?

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What the Dollar Index Measures

The US Dollar Index (DXY) measures the value of the US dollar relative to a weighted basket of six major foreign currencies, providing a single number that reflects the dollar's overall strength rather than its value against just one currency.

The Currency Basket

The index is heavily weighted toward the euro, which makes up more than half of the basket, along with the Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc.

How to Read the Index

The index was set to a base value of 100 when it was created in 1973, so a current reading above 100 indicates the dollar has strengthened against the basket since then, while a reading below 100 indicates it has weakened.

Why the Dollar Index Matters

Because the US dollar plays such a central role in global trade and finance, the index is widely watched as a general indicator of dollar strength, which in turn affects commodity prices, international trade, and emerging market economies.

Limitations of the Index

Since the index only tracks six currencies and is heavily weighted toward the euro, it does not fully capture the dollar's value against other major currencies, such as the Chinese renminbi, which is not included in the basket at all.

A widely watched but imperfect gauge

While the Dollar Index is one of the most commonly cited measures of dollar strength in financial media, its composition reflects trading patterns from the 1970s and has never been updated to include more recently significant currencies, which is a common point of criticism among economists.

Frequently Asked Questions

Does the Dollar Index include the Chinese renminbi?

No β€” despite China being one of the largest economies and trading partners in the world today, the renminbi is not part of the Dollar Index basket, because the index composition has not been updated since it was created in 1973.

Does a rising Dollar Index mean the US economy is doing well?

Not necessarily β€” a rising index simply means the dollar is strengthening relative to the basket currencies, which can happen for many reasons, including relative weakness in other economies rather than particular strength in the US economy itself.