The dollar index is one of the knowledge that traders should know. The US dollar is the world’s key currency and also a major currency. Many successful traders analyze and trade using the dollar index.
What is the Dollar Index?
A dollar index is a US dollar investment product. The dollar index is written as “USDX” in XM and is an index that represents the value of the dollar. The dollar index is an index that shows the value of the dollar throughout the market, not just one foreign currency versus the dollar. The Dollar Index shows the strength or weakness of the dollar relative to major national currencies such as the euro, pound, yen, Canadian dollar, and Australian dollar.
There are two types of dollar indexes: those of the New York Stock Exchange and those of the Federal Reserve Board (FRB). The New York Stock Exchange’s dollar index is ‘real-time’ and that of the US Federal Reserve is updated ‘once a day only’. In addition to the above two institutions, there is also a dollar index calculated by the Bank for International Settlements (BIS). Of these, many traders refer to the New York Stock Exchange dollar index, which is updated in real time
new york stock exchange
The New York Stock Exchange Dollar Index calculates the value of the dollar in proportion to six currencies (euro, Japanese yen, pound, Canadian dollar, krone, and Swiss franc). As a feature, the ratio of the euro is high, so it can be said that it is a dollar index that is highly related to the euro dollar. The update frequency is the only real-time update in the dollar index, and many traders refer to it.
Federal Reserve Board
The Federal Reserve’s Dollar Index calculates the value of the dollar relative to 26 currencies. As a feature, the Chinese yuan is included in the constituent currencies, accounting for about 20%. It can be said that it is a dollar index that is susceptible to the influence of the Chinese economy and sensitive to trade issues between the United States and China. It has characteristics that easily reflect the value of the dollar to the world economy, and the Federal Reserve Board is composed of 26 currencies while the New York Stock Exchange’s dollar index is calculated with 6 currencies. .
Bank for International Settlements
The Bank for International Settlements Dollar Index calculates the value of the dollar relative to 43 currencies. It tends to be more sensitive to the global economy than the Federal Reserve’s dollar index mentioned above. The update frequency is daily, and many traders refer to it.
How to use the dollar index
I understand that you can check the strength of the dollar by looking at the dollar index, but how can this dollar index be used in trading? Specifically, there are the following ways to use it.
currency strength
The dollar index is an indicator that shows the strength of the dollar. A quick look at the Dollar Index shows how strong or weak the dollar is relative to other currencies. A rising dollar index means that the dollar is being bought. A fall in the dollar index means that the dollar is being sold. It is said that it is good to trade according to this. The dollar index shows the strength of the currency as a whole, not the strength of a specific currency, so it can be used as a strategy for other currency pairs.
Relationship between the dollar index and the euro
The dollar index is often inversely correlated with the eurodollar. This is because about half of the dollar index is made up of euros. Judging by the dollar index charts, there are many traders who have a strategy of trading eurodollars. It is also possible to trade the dollar index by judging from the euro dollar chart.
Dollar Index (USDX) Trading Information
| symbol | USDX |
|---|---|
| leverage | 100 |
| minimum value | USD 0.01 |
| Spread | 0.05 |
| trade time | Monday 9:05 – Saturday 5:10 (Japan time) Maintenance time: 5:56-9:04 * Winter time is minus 1 hour from the above |
The method of trading “Dollar Index” on XM is exactly the same as trading regular currency pairs. If you select “USDX” from the stock selection of MT4 or MT5, the chart and price will be displayed, so you can buy and sell. Dollar Index (USDX) is classified into CFDs/Futures/Indices. Add funds and trade while checking the margin situation. The official XM management website also offers bonuses, points, and campaigns for standard accounts, which can be used as credits when placing orders.
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