📰 Fundamentals & Macro·intermediate

DXY (US Dollar Index)

Also called: dollar index, us dollar index

An index that measures the US dollar against a basket of six major currencies — the headline gauge of dollar strength.

The DXY (US Dollar Index) measures the dollar against a weighted basket of six currencies: euro (57.6%), yen (13.6%), pound (11.9%), Canadian dollar (9.1%), Swedish krona (4.2%), and Swiss franc (3.6%). The euro dominates the calculation, which means DXY is essentially "USD vs EUR" with some other currencies sprinkled in. DXY is the most-watched single number for US dollar direction. When DXY rises, the dollar is generally strengthening across the board. When it falls, the dollar is weakening. Traders use DXY as a quick filter — "is the dollar bid today?" — before deciding which pairs to trade. Because DXY is so euro-heavy, EUR/USD and DXY are almost mirror images. They move with about -0.95 correlation. If you're long DXY, you're effectively short EUR/USD. If you're long EUR/USD, you're short DXY. The two are different ways of expressing the same trade.

Real trade example

DXY rallied from 95 to 114 between January and September 2022 — a 20% move that crushed every USD-quoted pair. Traders watching DXY had a clear macro signal to short EUR/USD, GBP/USD, AUD/USD all year.

Related terms

Currency Pair

beginner

Two currencies quoted together — you're always buying one and selling the other at the same time.

FOMC

beginner

The US Federal Reserve's rate-setting committee — the most important meeting in global forex, held 8 times a year.

Interest Rate

intermediate

The cost of borrowing money set by a central bank — the single most important driver of currency strength in modern forex markets.

Carry Trade

advanced

A trade where you borrow a low-interest currency to buy a high-interest currency, profiting from the rate differential.

Safe Haven

intermediate

An asset that investors buy when they're scared — historically the US dollar, Japanese yen, Swiss franc, gold, and US Treasuries.

Quantitative Easing (QE)

advanced

A central bank policy of buying massive amounts of bonds to inject money into the economy and lower long-term interest rates.

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