US Dollar Index (USDX) - Financial definition

The US Dollar Index (USDX) is a financial indicator that tracks the performance of the US dollar against a group of six major currencies: the Euro (EUR), Japanese Yen (JPY), British Pound (GBP), Canadian Dollar (CAD), Swedish Krona (SEK), and Swiss Franc (CHF). The index was created in 1973 after the dissolution of the Bretton Woods Agreement, which ended the system of fixed exchange rates. The USDX starts with a base value of 100, and any movement above or below this value indicates a corresponding appreciation or depreciation of the US dollar. For instance, a USDX value of 110 means the dollar has appreciated 10% against the basket of currencies since the index’s inception.

The US Dollar Index is widely used by traders, economists, and policymakers to assess the dollar's relative strength. A rising index indicates a strengthening dollar, which can make US exports more expensive and imports cheaper, potentially impacting the US trade balance. Conversely, a falling index suggests a weakening dollar, which can have the opposite effect. The USDX is also a key tool for currency traders in the foreign exchange market, as it provides a clear benchmark for assessing the dollar's performance against a diversified group of global currencies.