There are more than a few dollar indices out there, including the trade-weighted dollar index, also known as the Broad Index. This one was created by the folks at the Federal Reserve, and it is often used by economists. This index is known as the Trade Weighted Dollar Index. You can find it on the Federal Reserve’s website. It is not the prettiest website to look at, but it still has some useful information for you.
The Trade Weighted Dollar Index is a great way to measure the value of the dollar against other foreign currencies. It is known as one of the broadest indices that measure the U.S. Dollar, and it seems to do a great job of that task.
This index attempts to improve upon the ICE Dollar Index by having more currencies in the mix and by updating on a more regular basis (as opposed to almost never!). This index first came out in 1998 as the Fed uses it to try to track the value of the U.S. Dollar in a more real-time way.
You can find the chart for the trade-weighted dollar index in TradingView here.
The Weighted Averages
There are several currencies included in this index that the Fed tries to add from “strongest to weakest”. The weighted value of each of those currencies can be found here:
The main difference between the USDX and what you get with this Fed-created index is in the number of currencies used and the fact that the Fed version updates regularly. That is a big sticking point, and it is something that the USDX does not do. Therefore, many people are critical of the USDX.
Given the fact that global trade is so dynamic and fast-moving these days, many believe that the Fed version of this index is probably the way to go if you want to see how currencies move against the dollar in real time. That is the data that most traders crave.
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