The U.S. dollar index is a bellwether for the foreign exchange market . The U.S. dollar index is similar to the Dow Jones Industrial Average, which shows the comprehensive state of U.S. stocks. Its English name is the US Dollar Index, abbreviated as USDX. The specific formula is as follows:
The US Dollar Index is calculated 24 hours a day, 7 days a week.
The U.S. dollar index is calculated with reference to the geometric average weighted value of the changes in the exchange rates of six currencies against the U.S. dollar in March 1973 , with a benchmark of 100.00 to measure its value. The 105.50 quote refers to a 5.50% increase in value since March 1973.
March 1973 was chosen as the reference point because it was a historic moment of turning point in the foreign exchange market . Since then, major trading nations have allowed their own currencies to freely float quotes with another country’s currency. The agreement, reached at the Smithsonian Institution in Washington, represents a victory for free-trade theorists. The Smithsonian agreement replaced the unsuccessful fixed exchange rate regime reached at Bretton Woods in New Hampshire some 25 years ago .
The current dollar index level reflects the dollar’s average relative to the 1973 benchmark. So far, the US dollar index has risen by 165 points and has also fallen below 80 points. This variation characteristic is widely compared to futures stock indices in terms of quantity and rate of change.