Dollar Index

The US Dollar Index (DXY) is a trade-weighted measure of the dollar against a basket of six major currencies: the euro (57.6% weight), Japanese yen (13.6%), British pound (11.9%), Canadian dollar (9.1%), Swedish krona (4.2%) and Swiss franc (3.6%). DXY is published by ICE Futures U.S. and the underlying futures contract trades electronically nearly 24 hours, five days a week.

DXY is the single most-watched macro signal globally. A strengthening DXY typically pressures emerging-market currencies (including the INR), commodities (gold, oil), and risk assets. A weakening DXY tends to be bullish for the same group. Indian traders who monitor DXY alongside USD/INR and US 10-year yields are tracking the three components of the global financial cycle.

DXY was created in March 1973 immediately after the collapse of the Bretton Woods system, with a starting level of 100. The basket and weights were last adjusted in 1999 when 11 European currencies were replaced by the single euro. The index has traded above 100 most of its history but dipped as low as 70.7 in March 2008.

ICE Futures U.S. DXY hours (IST):

DXY's two biggest drivers are US monetary policy expectations (relative to the ECB, BoJ, BoE) and global risk appetite. During risk-off episodes DXY usually rallies as a safe-haven; during risk-on it sells off. The euro at 57.6% weight means DXY is effectively an inverse EUR/USD chart — when reading the DXY tape, glance at EUR/USD for confirmation.