June 4 (Tue): [Bollinger Bands] Nikkei 225 vs. Dollar Index

Good morning.

This time, after a long time,

“Dollar Index”

I would like to take a look at a comparison with it.

【What is the Dollar Index?】

The Dollar Index (US Dollar Index, DXY) is an index that measures the value of the U.S. dollar against a basket of major foreign currencies.

It was introduced in 1973 by ICE (Intercontinental Exchange) and is widely used in currency markets around the world.

【Constituent Currencies】

It measures the value of the dollar against the following six major currencies.

This currency basket is used to calculate the Dollar Index as a weighted average that underpins the index:

1. Euro (EUR)：Weight ~57.6%
2. Japanese Yen (JPY)：Weight ~13.6%
3. British Pound (GBP)：Weight ~11.9%
4. Canadian Dollar (CAD)：Weight ~9.1%
5. Swedish Krona (SEK)：Weight ~4.2%
6. Swiss Franc (CHF)：Weight ~3.6%

※ More than half is in euros, so if you flip the Euro/US Dollar chart, you’ll get a chart almost identical to the Dollar Index.

【Calculation Method】

The Dollar Index is calculated by taking a weighted average of the dollar’s value against these currencies. Each currency is weighted according to the size of its economy and its trade with the United States. The specific calculation is based on exchange rate movements from the base year (1973).

【Roles and Uses】

The Dollar Index serves the following purposes and roles:

1. Economic Indicator: Used as an indicator of dollar strength or weakness, to assess the health of the U.S. economy, inflation rate, and the impact of interest rate policy.
2. Investment Decisions: Used by investors and traders as a reference in foreign exchange markets, international trade, and risk management.
3. Monetary Policy: Used as reference data when central banks or governments decide on exchange-rate policy.

The Dollar Index is one of the important indicators in financial markets and is widely used to evaluate the dollar’s relative value. In financial news and economic reports, movements in the Dollar Index are often discussed, and its fluctuations can trigger market responses.

【About the Newsletter Issues】

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