Trade-Weighted Dollar Index

There is also another kind of dollar index used by the Federal Reserve. It is called the “trade-weighted U.S. dollar index“.

The Fed wanted to create an index that could more accurately reflect the dollar’s value against foreign currencies based on how competitive U.S. goods are compared to goods from other countries. It was formed in 1998 in order to keep up-to-date with U.S. trade.

The Trade-Weighted U.S. Dollar Index

Here is the current weighting (in percentage) of the index:

Country Weight(%)
Euro zone 16.22
China 20.81
Canada 12.618
Mexico 11.67
Japan 7.552
United Kingdom 3.393
Korea 3.8
Taiwan 2.381
Singapore 1.889
Brazil 2.204
Malaysia 1.467
Hong Kong 1.269
India 1.958
Switzerland 1.634
Thailand 1.408
Australia 1.415
Russia 1.202
Israel 1.034
Sweden 0.734
Indonesia 1.063
Saudi Arabia 1.071
Chile 0.876
Philippines 0.553
Colombia 0.664
Argentina 0.63
Venezuela 0.485
Total 100

*Weights as of October 21, 2013

The main difference between the USDX and the trade-weighted U.S. dollar index is the basket of currencies used and their relative weights.

The trade weighted index includes countries from all over the world, including some developing countries. Given how global trade is developing, this index is probably a better reflection of the dollar’s value across the globe.

The weights are based on annual trade data.

Weights for the broad index can be found at http://www.federalreserve.gov/releases/H10/Weights.

If you’d like to see historical data, check out http://www.federalreserve.gov/releases/h10/Summary/.

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  1. What is the US Dollar Index?
  2. How to Read the US Dollar Index
  3. Trade-Weighted Dollar Index
  4. How to Use the USDX for Forex Trading
  5. The Dollar Smile Theory