There is also another kind of U.S. dollar index.
It was created by the Federal Reserve and is now used widely by lots of sexy people, like economists and currency analysts.
It is called the “Trade Weighted U.S. Dollar Index“.
You can find it on the Federal Reserve Economic Data (FRED) website here.
Their website is probably one of the most beautiful websites ever made…
Just kidding. It’s a government website.
Beautiful? Like lipstick on a pig.
Useful? Hell yeah. 👍
The trade-weighted US dollar index, also known as the broad index, is a measure of the value of the U.S. dollar relative to other foreign currencies.
It is a trade-weighted index that tries to improve on the older AND privately-owned ICE U.S. Dollar Index (USDX) by using more currencies and updating the weights yearly.
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
The Federal Reserve Bank of St. Louis provides “weighted averages of the foreign exchange value of the U.S. dollar against the currencies of a broad group of major U.S. trading partners.”
From strongest to weakest, here is the current weighting (in percentage) of the index:
| Country | Weight(%) |
|---|---|
| Eurozone | 18.947 |
| China | 15.835 |
| Canada | 13.384 |
| Mexico | 13.524 |
| Japan | 6.272 |
| United Kingdom | 5.306 |
| Korea | 3.322 |
| Taiwan | 1.95 |
| Singapore | 1.848 |
| Brazil | 1.979 |
| Malaysia | 1.246 |
| Hong Kong | 1.41 |
| India | 2.874 |
| Switzerland | 2.554 |
| Thailand | 1.096 |
| Australia | 1.395 |
| Russia | 0.526 |
| Israel | 1.053 |
| Sweden | 0.52 |
| Indonesia | 0.675 |
| Saudi Arabia | 0.499 |
| Chile | 0.625 |
| Philippines | 0.687 |
| Colombia | 0.604 |
| Argentina | 0.507 |
| Total | 100 |
*Weights as of December 16, 2019
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 U.S. dollar’s value across the globe.
The weights are based on annual trade data.
Weights for the broad index can be found at https://www.federalreserve.gov/releases/H10/Weights/.
If you’d like to see historical data, check out https://www.federalreserve.gov/releases/h10/Summary/.