The US Dollar Index measures the value of the US dollar relative to a basket of currencies from major US trading partners. It includes the euro, yen, Canadian dollar, Swedish krona, Swiss franc and British pound. The euro has the highest weighting at 57.6%. The index started in 1973 with a base value of 100 and measures changes in the dollar's value relative to this base. A higher index means the dollar is stronger compared to other currencies.

1. What Is US Dollar Index?
• It Is A Measure Of The Value Of The Us Dollar Relative
To A Basket Of Currencies Of The Country's Most
Significant Trading Partners. The Index Contains Six
Component Currencies
The Euro, Japanese Yen, Canadian Dollar, Swedish
Krona, Swiss Franc And The British Pound.
• The Euro Has The Highest Weightage Versus The Dollar
In The Index At 57.6% Followed By The Yen (13.6%) And
The Pound (11.9%).
• The Index Was Originally Measured Against A Basket
Of 10 Currencies But In 1999, The Euro Replaced Other
European Currencies That Were Included Previously ,
Including The French Franc, Deutsche Mark, Belgium
Franc And The Italian Lira.

2. Understanding of Dollar
Index Movement:
• The Index Started In 1973 with a base
value of 100. It measures the Dollar’s
Values relative to the base level. For
Example, If the Dollar Index is at 93, it
means that Dollar has fallen 7% since the
start of the Index.
• Likewise, If it is at 110, It means that its
value has risen 10% since the start of the
Index.
• The Index had hit its highest level ever of
164.7 in March, 1985 and the lowest level
of 70.69 in March, 2008.
Strengthening Of Dollar Index
Weakening Of Dollar Index

3. The Impact Of US Dollar Index:
Currency Market:
The Impact of Dollar Index On Currency market is quite
obvious. When the Dollar index Rises, Other Currencies
including the PKR falls relative to the USD. On the other
hand, when the Dollar Index falls the PKR appreciate
w.r.t the USD.
Commodity Market:
Commodity Prices are usually inversely related to the
Dollar index. Therefore, when the Dollar Index rises, price
of commodities like Crude, Metals etc. falls and vice versa.
Gold has a strong inverse relationship with Dollar Index.

4. A stronger dollar can result from trade surpluses, influencing global financial markets
and impacting international trade. Traders and policymakers use the USDX as a tool
to assess the dollar's overall strength in the context of the global economy. It serves as
a valuable indicator for economic trends and influences investment decisions
worldwide.
Working Of Dollar Index:

5. USDX Effect on Poor and Wealthier Nations
• The U.S. Dollar Index's impact on currencies varies for rich and poor nations. A stronger USD,
reflected in the index, often leads to weaker currencies in less affluent countries, increasing
their import costs and debt burdens.
• Conversely, stronger currencies in wealthier nations may result in lower import prices and
economic advantages. The index, therefore, influences global wealth distribution by affecting
exchange rates, potentially exacerbating economic disparities between rich and poor nations.

6. US Dollar Index Chart of all 49 years
1973

7. US Dollar Index Chart of Recent 5 years

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