Broad Trade-Weighted Dollar Index
The dollar is the price of global liquidity. A broad, trade-weighted measure is a better read than the euro-heavy DXY that most sites quote.
History
Broad versus the DXY
['The DXY index is a fixed basket that is roughly 58% euro, 14% yen and 11% sterling. It is heavily European and has not been rebalanced to reflect actual U.S. trade since the 1990s.
', "The Federal Reserve's broad index weights 26 currencies by trade share, with a much larger emerging-market component, in particular Mexico, China and Canada. That makes it a better measure of the dollar's effect on import prices and on dollar-funded borrowers abroad.
"]Why equity investors watch it
['A stronger dollar mechanically reduces the translated overseas earnings of U.S. multinationals, tightens financial conditions for non-U.S. borrowers who owe dollars, and is associated with risk-off episodes. A sharply rising dollar and a rising VIX usually appear together.
', 'It is also the mechanism through which U.S. rates transmit to the rest of the world. When the dollar rises because U.S. real yields rose, the effect on emerging markets is not neutral.
']The record since 2006
['The index was set to 100 in January 2006. It has traded between roughly 95 and 130, with a high in 2022 that coincided with the fastest Fed tightening cycle in four decades, and a low in 2008 and again in 2011.
', 'Because the base is 2006, a reading of 121 does not mean "21% above fair value" — it means 21% above the 2006 average of U.S. trade partners\' currencies. Treat the level as an index and the percentile as the comparison.
']How we calculate it
["We publish DTWEXBGS directly from FRED, daily, as issued in the H.10 release. No smoothing or reindexing. The percentile is the share of daily observations since January 2006 below today's value.
", 'The series is nominal, not inflation adjusted — real exchange rates are a different and slower-moving measure.
']Distribution since 2006
Each row is the share of historical observations at or below that level. A reading in the 90th percentile is higher than nine tenths of the record.
Important
Not investment advice. This page is published for information and education only. It is not a recommendation, solicitation, or offer to buy or sell any security. Market data may be delayed, incomplete, or revised. Indicators describe the past; they do not forecast returns. Past performance does not guarantee future results. Do your own research or consult a licensed financial professional before acting on anything you read here.
Questions
Why not use the DXY?
The DXY is euro-dominated and its weights are decades old. The Fed's broad index weights 26 currencies by actual trade share, which is closer to what affects import prices and dollar funding.
Is a strong dollar bad for stocks?
It is a headwind for companies with large overseas revenue and for dollar borrowers abroad. It is not a reliable index-level timing signal.
Why does the series start in 2006?
That is when the current broad index methodology began with a base of 100. Earlier data uses different weights and is not comparable.
Why is the latest stretch of the chart locked?
The current reading and the full record are free. The most recent sessions are member-only.