{"content_id":"59p1ohqsdj","slug":"dollar-index-100-calculation-and-interpretation","locale":"en","schema_type":"Article","category":"knowledge_base","category_name":"Knowledge Base","title":"US Dollar Index: 100 Baseline and Interpretation","summary":"The US Dollar Index measures the relative value of the US dollar against six major currencies. It uses March 1973 as a base of 100 and does not directly represent the KRW exchange rate or the dollar's purchasing power.","sponsorship_disclosure":null,"affiliate_disclosure":null,"commerce_disclosure":null,"author":{"name":"Injoys Editorial Team","url":"https://injoys.com/ko/about"},"key_points":["The US Dollar Index is a relative measure that sets the dollar's March 1973 value at 100.","The euro, yen, pound, Canadian dollar, Swedish krona, and Swiss franc are included in the formula.","The weights and rankings of the euro and Swiss franc should be verified using official US Dollar Index composition data.","An index above 100 means the dollar is stronger than it was at the baseline date.","The USD/KRW exchange rate and the US Dollar Index use different comparison targets, so they may move in opposite directions."],"content_markdown":"The value of the dollar can be assessed using the U.S. Dollar Index, which combines its relative strength against six major currencies. The base value is 100 as of March 1973. A value above 100 means the dollar is stronger than at the base point, while a value below 100 means it is weaker.\n\nVerify the figures in the U.S. Dollar Index Futures product description and methodology on the ICE website.\n\n## What Is the U.S. Dollar Index?\n\nThe U.S. Dollar Index represents the relative value of the U.S. dollar against six currencies. It is commonly called DXY, and related products are traded in the futures market. It is more suitable for assessing the dollar’s overall direction than an exchange rate against a single country’s currency.\n\nThe currencies compared include the euro and Japanese yen. The British pound and Canadian dollar are also included. The Swedish krona and Swiss franc are included in the formula as well.\n\nThe U.S. Dollar Index set March 1973 at 100. This does not represent a fixed monetary amount or purchasing power. It is a relative index level compared with the currency basket at that time.\n\nThe exact wording of the formula and contract specifications should be checked in ICE’s U.S. Dollar Index Futures product description and methodology.\n\n## Weights of the Six Currencies\n\nThe U.S. Dollar Index does not give each currency equal weight. The euro accounts for more than half of the index. Therefore, movements in the euro have a major impact on the index.\n\n| Currency | Weight in the Current ICE Formula | Effect on the U.S. Dollar Index |\n|---|---:|---|\n| Euro | 57.6% | Has the largest weight |\n| Japanese yen | 13.6% | Has the second-largest weight |\n| British pound | 11.9% | Reflects European currency trends along with the euro |\n| Canadian dollar | 9.1% | Reflects North American currency trends |\n| Swedish krona | 4.2% | Has a relatively small impact |\n| Swiss franc | 3.6% | Has the smallest weight among the six currencies |\n\nThe expression “currencies of six countries” may not be accurate here. The euro is a currency shared by multiple euro-area countries. The U.S. Dollar Index consists of six currencies, not six countries.\n\n## How the U.S. Dollar Index Is Calculated\n\nThe U.S. Dollar Index is calculated using a weighted geometric method rather than a simple arithmetic average. A specified exponent is applied to each exchange rate. The sign of the exponent also varies depending on how the exchange rate is quoted.\n\nA representative formula is as follows.\n\n`DXY = 50.14348112 × EUR/USD^-0.576 × USD/JPY^0.136 × GBP/USD^-0.119 × USD/CAD^0.091 × USD/SEK^0.042 × USD/CHF^0.036`\n\nThe quotation methods for the euro and pound should be checked in the official U.S. Dollar Index formula. When these two exchange rates rise, the dollar has weakened, so their exponents are negative. The quotation methods and signs for the remaining currencies should be checked in the official U.S. Dollar Index formula.\n\nThe constant in the formula sets the index at 100 at the base point. Changes in each currency’s exchange rate are combined according to its weight. The result is not obtained by simply adding the percentage changes of individual currencies.\n\n## How to Read the U.S. Dollar Index\n\nThe U.S. Dollar Index can be read by checking the base value, direction, and causes of movement in order. Following these steps helps avoid confusing it with a single exchange rate.\n\n1. Check whether the index is above or below 100.\n2. Check whether it has risen since the previous observation point.\n3. Review movements in heavily weighted currencies such as the euro.\n4. Separately check any necessary individual exchange rates, such as the won–dollar exchange rate.\n5. To assess purchasing power, review inflation indicators as well.\n\nBeing above 100 means that the dollar is stronger than at the base point. However, it does not mean that the dollar has continued to rise recently. The current level and short-term direction must be distinguished from each other.\n\n## Calculation Example\n\nIf the index is exactly 100, the ratio to the base value is 100÷100. The result is 1, meaning that the index is at the same level as at the base point. This does not mean that U.S. prices or living costs are the same.\n\nIf the index rises above 100, the dollar is stronger against the basket. If it falls below 100, it is weaker than at the base point. The comparison is against a basket combining the six currencies.\n\nThe percentage change from the base value can be calculated as follows.\n\n`Percentage change from the base value = (Observed index ÷ 100 - 1) × 100%`\n\nThe first 100 in this formula is the March 1973 base value. The final 100% is the unit used to convert the ratio into a percentage. The actual observed index should be checked through ICE or a financial information provider.\n\n## Summary by Purpose\n\nThe appropriate indicator for assessing the dollar’s value depends on the question. The U.S. Dollar Index alone cannot explain every meaning of the dollar’s value.\n\n| What You Want to Check | Suitable Indicator | Scope of Interpretation |\n|---|---|---|\n| Exchange ratio between the dollar and won | Won–dollar exchange rate | Relationship with the single currency of the won |\n| Direction of the dollar against six major currencies | U.S. Dollar Index | Relationship with a fixed currency basket |\n| Value broadly reflecting trading partners | Trade-weighted dollar index | Relative value reflecting the trade structure |\n| Value reflecting price differences between countries | Real effective exchange rate | Reflects both nominal exchange rates and relative prices |\n| Amount that can be purchased with dollars within the United States | Inflation indicators such as the Consumer Price Index | Domestic purchasing power of the dollar |\n\nTo assess overseas travel costs, you should check the exchange rate against the destination’s currency. To analyze export price competitiveness, an effective exchange rate is more appropriate. The dollar’s purchasing power within the United States should be assessed using the inflation rate.\n\n## Comparing the U.S. Dollar Index and the Won–Dollar Exchange Rate\n\nThe U.S. Dollar Index and the won–dollar exchange rate use different comparison currencies. The won is not among the six currencies that make up the U.S. Dollar Index. The two indicators cannot be assumed to always move in the same direction.\n\n| Category | U.S. Dollar Index | Won–Dollar Exchange Rate |\n|---|---|---|\n| Comparison | Dollar and six major currencies | Dollar and won |\n| Whether the won is reflected | Not reflected | Directly reflected |\n| Meaning of an increase | Dollar strengthens against the basket | Won weakens against the dollar |\n| Main use | Assessing the dollar’s international direction | Assessing won exchange, trade, and foreign-currency costs |\n\nThe dollar may weaken against the euro while strengthening against the won. In this case, the U.S. Dollar Index may fall while the won–dollar exchange rate rises. Supply and demand for the won itself and conditions in South Korea’s financial markets also affect the exchange rate.\n\n## Comparing the Fixed Basket and Trade-Weighted Indices\n\nThe U.S. Dollar Index has a simple structure, but it does not fully reflect the modern trade structure. The Chinese yuan and Korean won are not constituent currencies. The euro’s weight should be checked in the official U.S. Dollar Index composition data.\n\nThe U.S. Federal Reserve provides dollar indicators that reflect a broader range of currencies. The Bank for International Settlements also publishes nominal and real effective exchange rate data. These indicators can be used together depending on the purpose of the analysis.\n\n| Item | U.S. Dollar Index | Broad Trade-Weighted Index | Real Effective Exchange Rate |\n|---|---|---|---|\n| Currency composition | Six fixed currencies | Broad range of trading-partner currencies | Trading-partner currencies |\n| Basis for weights | Predetermined fixed weights | Trade structure | Trade structure and relative prices |\n| Inflation reflected | No | Not in the nominal index | Yes |\n| Suitable use | Checking the dollar’s market direction | Analyzing the dollar’s value based on trade | Analyzing price competitiveness and real value |\n\nThis distinction does not mean that the U.S. Dollar Index is wrong. Each indicator measures a different subject. The key is to choose the indicator that fits the question.\n\n## Common Mistakes\n\nThe most common mistake is reading the U.S. Dollar Index as the dollar’s absolute value. The U.S. Dollar Index is a relative indicator compared with a currency basket. It does not directly measure commodity prices or domestic purchasing power.\n\n- Do not interpret 100 as the current normal exchange rate.\n- The relationship between index points and changes in the constituent currencies should be checked in the official U.S. Dollar Index formula.\n- Do not assume that the won–dollar exchange rate necessarily moves in the same direction.\n- Do not overlook the euro’s 57.6% weight.\n- Distinguish nominal exchange rates from real values that reflect inflation.\n- Separate the index level from its direction of movement over a day or month.\n\nA rise in the U.S. Dollar Index alone also does not establish that the U.S. economy has improved. Interest-rate expectations and demand for safe-haven assets may work together. The index may also rise because the currencies of other major economies have weakened.\n\n## Indicators to Review When Assessing the Dollar’s Value\n\nFor practical assessments, the U.S. Dollar Index should be used together with indicators suited to the purpose. Investors can additionally check interest rates, inflation, and individual exchange rates. Companies should also consider their settlement currencies and foreign-currency assets and liabilities.\n\nThe items to check can be divided as follows.\n\n- Market direction of the dollar: U.S. Dollar Index\n- Price when exchanging into won: Won–dollar exchange rate\n- U.S. monetary conditions: Federal funds rate and market interest rates\n- Domestic purchasing power of the dollar: U.S. Consumer Price Index\n- Competitiveness based on trade: Nominal and real effective exchange rates\n- Changes over a specific period: Time series using the same basis and observation time\n\nLooking at only one indicator may cause you to miss the reasons behind a change. It is also necessary to determine whether dollar strength is driven by factors related to the dollar itself. Weakness in the comparison currencies may be the primary cause.","content_html":"\u003cp\u003eThe value of the dollar can be assessed using the U.S. Dollar Index, which combines its relative strength against six major currencies. The base value is 100 as of March 1973. A value above 100 means the dollar is stronger than at the base point, while a value below 100 means it is weaker.\u003c/p\u003e\n\u003cp\u003eVerify the figures in the U.S. Dollar Index Futures product description and methodology on the ICE website.\u003c/p\u003e\n\u003ch2\u003e\n\u003ca href=\"#what-is-the-us-dollar-index\" class=\"anchor\" id=\"what-is-the-us-dollar-index\"\u003e\u003c/a\u003eWhat Is the U.S. Dollar Index?\u003c/h2\u003e\n\u003cp\u003eThe U.S. Dollar Index represents the relative value of the U.S. dollar against six currencies. It is commonly called DXY, and related products are traded in the futures market. It is more suitable for assessing the dollar’s overall direction than an exchange rate against a single country’s currency.\u003c/p\u003e\n\u003cp\u003eThe currencies compared include the euro and Japanese yen. The British pound and Canadian dollar are also included. The Swedish krona and Swiss franc are included in the formula as well.\u003c/p\u003e\n\u003cp\u003eThe U.S. Dollar Index set March 1973 at 100. This does not represent a fixed monetary amount or purchasing power. It is a relative index level compared with the currency basket at that time.\u003c/p\u003e\n\u003cp\u003eThe exact wording of the formula and contract specifications should be checked in ICE’s U.S. Dollar Index Futures product description and methodology.\u003c/p\u003e\n\u003ch2\u003e\n\u003ca href=\"#weights-of-the-six-currencies\" class=\"anchor\" id=\"weights-of-the-six-currencies\"\u003e\u003c/a\u003eWeights of the Six Currencies\u003c/h2\u003e\n\u003cp\u003eThe U.S. Dollar Index does not give each currency equal weight. The euro accounts for more than half of the index. Therefore, movements in the euro have a major impact on the index.\u003c/p\u003e\n\u003cdiv class=\"overflow-x-auto\"\u003e\u003ctable\u003e\n\u003cthead\u003e\n\u003ctr\u003e\n\u003cth\u003eCurrency\u003c/th\u003e\n\u003cth\u003eWeight in the Current ICE Formula\u003c/th\u003e\n\u003cth\u003eEffect on the U.S. Dollar Index\u003c/th\u003e\n\u003c/tr\u003e\n\u003c/thead\u003e\n\u003ctbody\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Currency\"\u003eEuro\u003c/td\u003e\n\u003ctd data-label=\"Weight in the Current ICE Formula\"\u003e57.6%\u003c/td\u003e\n\u003ctd data-label=\"Effect on the U.S. Dollar Index\"\u003eHas the largest weight\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Currency\"\u003eJapanese yen\u003c/td\u003e\n\u003ctd data-label=\"Weight in the Current ICE Formula\"\u003e13.6%\u003c/td\u003e\n\u003ctd data-label=\"Effect on the U.S. Dollar Index\"\u003eHas the second-largest weight\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Currency\"\u003eBritish pound\u003c/td\u003e\n\u003ctd data-label=\"Weight in the Current ICE Formula\"\u003e11.9%\u003c/td\u003e\n\u003ctd data-label=\"Effect on the U.S. Dollar Index\"\u003eReflects European currency trends along with the euro\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Currency\"\u003eCanadian dollar\u003c/td\u003e\n\u003ctd data-label=\"Weight in the Current ICE Formula\"\u003e9.1%\u003c/td\u003e\n\u003ctd data-label=\"Effect on the U.S. Dollar Index\"\u003eReflects North American currency trends\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Currency\"\u003eSwedish krona\u003c/td\u003e\n\u003ctd data-label=\"Weight in the Current ICE Formula\"\u003e4.2%\u003c/td\u003e\n\u003ctd data-label=\"Effect on the U.S. Dollar Index\"\u003eHas a relatively small impact\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Currency\"\u003eSwiss franc\u003c/td\u003e\n\u003ctd data-label=\"Weight in the Current ICE Formula\"\u003e3.6%\u003c/td\u003e\n\u003ctd data-label=\"Effect on the U.S. Dollar Index\"\u003eHas the smallest weight among the six currencies\u003c/td\u003e\n\u003c/tr\u003e\n\u003c/tbody\u003e\n\u003c/table\u003e\u003c/div\u003e\n\u003cp\u003eThe expression “currencies of six countries” may not be accurate here. The euro is a currency shared by multiple euro-area countries. The U.S. Dollar Index consists of six currencies, not six countries.\u003c/p\u003e\n\u003ch2\u003e\n\u003ca href=\"#how-the-us-dollar-index-is-calculated\" class=\"anchor\" id=\"how-the-us-dollar-index-is-calculated\"\u003e\u003c/a\u003eHow the U.S. Dollar Index Is Calculated\u003c/h2\u003e\n\u003cp\u003eThe U.S. Dollar Index is calculated using a weighted geometric method rather than a simple arithmetic average. A specified exponent is applied to each exchange rate. The sign of the exponent also varies depending on how the exchange rate is quoted.\u003c/p\u003e\n\u003cp\u003eA representative formula is as follows.\u003c/p\u003e\n\u003cp\u003e\u003ccode\u003eDXY = 50.14348112 × EUR/USD^-0.576 × USD/JPY^0.136 × GBP/USD^-0.119 × USD/CAD^0.091 × USD/SEK^0.042 × USD/CHF^0.036\u003c/code\u003e\u003c/p\u003e\n\u003cp\u003eThe quotation methods for the euro and pound should be checked in the official U.S. Dollar Index formula. When these two exchange rates rise, the dollar has weakened, so their exponents are negative. The quotation methods and signs for the remaining currencies should be checked in the official U.S. Dollar Index formula.\u003c/p\u003e\n\u003cp\u003eThe constant in the formula sets the index at 100 at the base point. Changes in each currency’s exchange rate are combined according to its weight. The result is not obtained by simply adding the percentage changes of individual currencies.\u003c/p\u003e\n\u003ch2\u003e\n\u003ca href=\"#how-to-read-the-us-dollar-index\" class=\"anchor\" id=\"how-to-read-the-us-dollar-index\"\u003e\u003c/a\u003eHow to Read the U.S. Dollar Index\u003c/h2\u003e\n\u003cp\u003eThe U.S. Dollar Index can be read by checking the base value, direction, and causes of movement in order. Following these steps helps avoid confusing it with a single exchange rate.\u003c/p\u003e\n\u003col\u003e\n\u003cli\u003eCheck whether the index is above or below 100.\u003c/li\u003e\n\u003cli\u003eCheck whether it has risen since the previous observation point.\u003c/li\u003e\n\u003cli\u003eReview movements in heavily weighted currencies such as the euro.\u003c/li\u003e\n\u003cli\u003eSeparately check any necessary individual exchange rates, such as the won–dollar exchange rate.\u003c/li\u003e\n\u003cli\u003eTo assess purchasing power, review inflation indicators as well.\u003c/li\u003e\n\u003c/ol\u003e\n\u003cp\u003eBeing above 100 means that the dollar is stronger than at the base point. However, it does not mean that the dollar has continued to rise recently. The current level and short-term direction must be distinguished from each other.\u003c/p\u003e\n\u003ch2\u003e\n\u003ca href=\"#calculation-example\" class=\"anchor\" id=\"calculation-example\"\u003e\u003c/a\u003eCalculation Example\u003c/h2\u003e\n\u003cp\u003eIf the index is exactly 100, the ratio to the base value is 100÷100. The result is 1, meaning that the index is at the same level as at the base point. This does not mean that U.S. prices or living costs are the same.\u003c/p\u003e\n\u003cp\u003eIf the index rises above 100, the dollar is stronger against the basket. If it falls below 100, it is weaker than at the base point. The comparison is against a basket combining the six currencies.\u003c/p\u003e\n\u003cp\u003eThe percentage change from the base value can be calculated as follows.\u003c/p\u003e\n\u003cp\u003e\u003ccode\u003ePercentage change from the base value = (Observed index ÷ 100 - 1) × 100%\u003c/code\u003e\u003c/p\u003e\n\u003cp\u003eThe first 100 in this formula is the March 1973 base value. The final 100% is the unit used to convert the ratio into a percentage. The actual observed index should be checked through ICE or a financial information provider.\u003c/p\u003e\n\u003ch2\u003e\n\u003ca href=\"#summary-by-purpose\" class=\"anchor\" id=\"summary-by-purpose\"\u003e\u003c/a\u003eSummary by Purpose\u003c/h2\u003e\n\u003cp\u003eThe appropriate indicator for assessing the dollar’s value depends on the question. The U.S. Dollar Index alone cannot explain every meaning of the dollar’s value.\u003c/p\u003e\n\u003cdiv class=\"overflow-x-auto\"\u003e\u003ctable\u003e\n\u003cthead\u003e\n\u003ctr\u003e\n\u003cth\u003eWhat You Want to Check\u003c/th\u003e\n\u003cth\u003eSuitable Indicator\u003c/th\u003e\n\u003cth\u003eScope of Interpretation\u003c/th\u003e\n\u003c/tr\u003e\n\u003c/thead\u003e\n\u003ctbody\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"What You Want to Check\"\u003eExchange ratio between the dollar and won\u003c/td\u003e\n\u003ctd data-label=\"Suitable Indicator\"\u003eWon–dollar exchange rate\u003c/td\u003e\n\u003ctd data-label=\"Scope of Interpretation\"\u003eRelationship with the single currency of the won\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"What You Want to Check\"\u003eDirection of the dollar against six major currencies\u003c/td\u003e\n\u003ctd data-label=\"Suitable Indicator\"\u003eU.S. Dollar Index\u003c/td\u003e\n\u003ctd data-label=\"Scope of Interpretation\"\u003eRelationship with a fixed currency basket\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"What You Want to Check\"\u003eValue broadly reflecting trading partners\u003c/td\u003e\n\u003ctd data-label=\"Suitable Indicator\"\u003eTrade-weighted dollar index\u003c/td\u003e\n\u003ctd data-label=\"Scope of Interpretation\"\u003eRelative value reflecting the trade structure\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"What You Want to Check\"\u003eValue reflecting price differences between countries\u003c/td\u003e\n\u003ctd data-label=\"Suitable Indicator\"\u003eReal effective exchange rate\u003c/td\u003e\n\u003ctd data-label=\"Scope of Interpretation\"\u003eReflects both nominal exchange rates and relative prices\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"What You Want to Check\"\u003eAmount that can be purchased with dollars within the United States\u003c/td\u003e\n\u003ctd data-label=\"Suitable Indicator\"\u003eInflation indicators such as the Consumer Price Index\u003c/td\u003e\n\u003ctd data-label=\"Scope of Interpretation\"\u003eDomestic purchasing power of the dollar\u003c/td\u003e\n\u003c/tr\u003e\n\u003c/tbody\u003e\n\u003c/table\u003e\u003c/div\u003e\n\u003cp\u003eTo assess overseas travel costs, you should check the exchange rate against the destination’s currency. To analyze export price competitiveness, an effective exchange rate is more appropriate. The dollar’s purchasing power within the United States should be assessed using the inflation rate.\u003c/p\u003e\n\u003ch2\u003e\n\u003ca href=\"#comparing-the-us-dollar-index-and-the-wondollar-exchange-rate\" class=\"anchor\" id=\"comparing-the-us-dollar-index-and-the-wondollar-exchange-rate\"\u003e\u003c/a\u003eComparing the U.S. Dollar Index and the Won–Dollar Exchange Rate\u003c/h2\u003e\n\u003cp\u003eThe U.S. Dollar Index and the won–dollar exchange rate use different comparison currencies. The won is not among the six currencies that make up the U.S. Dollar Index. The two indicators cannot be assumed to always move in the same direction.\u003c/p\u003e\n\u003cdiv class=\"overflow-x-auto\"\u003e\u003ctable\u003e\n\u003cthead\u003e\n\u003ctr\u003e\n\u003cth\u003eCategory\u003c/th\u003e\n\u003cth\u003eU.S. Dollar Index\u003c/th\u003e\n\u003cth\u003eWon–Dollar Exchange Rate\u003c/th\u003e\n\u003c/tr\u003e\n\u003c/thead\u003e\n\u003ctbody\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Category\"\u003eComparison\u003c/td\u003e\n\u003ctd data-label=\"U.S. Dollar Index\"\u003eDollar and six major currencies\u003c/td\u003e\n\u003ctd data-label=\"Won–Dollar Exchange Rate\"\u003eDollar and won\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Category\"\u003eWhether the won is reflected\u003c/td\u003e\n\u003ctd data-label=\"U.S. Dollar Index\"\u003eNot reflected\u003c/td\u003e\n\u003ctd data-label=\"Won–Dollar Exchange Rate\"\u003eDirectly reflected\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Category\"\u003eMeaning of an increase\u003c/td\u003e\n\u003ctd data-label=\"U.S. Dollar Index\"\u003eDollar strengthens against the basket\u003c/td\u003e\n\u003ctd data-label=\"Won–Dollar Exchange Rate\"\u003eWon weakens against the dollar\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Category\"\u003eMain use\u003c/td\u003e\n\u003ctd data-label=\"U.S. Dollar Index\"\u003eAssessing the dollar’s international direction\u003c/td\u003e\n\u003ctd data-label=\"Won–Dollar Exchange Rate\"\u003eAssessing won exchange, trade, and foreign-currency costs\u003c/td\u003e\n\u003c/tr\u003e\n\u003c/tbody\u003e\n\u003c/table\u003e\u003c/div\u003e\n\u003cp\u003eThe dollar may weaken against the euro while strengthening against the won. In this case, the U.S. Dollar Index may fall while the won–dollar exchange rate rises. Supply and demand for the won itself and conditions in South Korea’s financial markets also affect the exchange rate.\u003c/p\u003e\n\u003ch2\u003e\n\u003ca href=\"#comparing-the-fixed-basket-and-trade-weighted-indices\" class=\"anchor\" id=\"comparing-the-fixed-basket-and-trade-weighted-indices\"\u003e\u003c/a\u003eComparing the Fixed Basket and Trade-Weighted Indices\u003c/h2\u003e\n\u003cp\u003eThe U.S. Dollar Index has a simple structure, but it does not fully reflect the modern trade structure. The Chinese yuan and Korean won are not constituent currencies. The euro’s weight should be checked in the official U.S. Dollar Index composition data.\u003c/p\u003e\n\u003cp\u003eThe U.S. Federal Reserve provides dollar indicators that reflect a broader range of currencies. The Bank for International Settlements also publishes nominal and real effective exchange rate data. These indicators can be used together depending on the purpose of the analysis.\u003c/p\u003e\n\u003cdiv class=\"overflow-x-auto\"\u003e\u003ctable\u003e\n\u003cthead\u003e\n\u003ctr\u003e\n\u003cth\u003eItem\u003c/th\u003e\n\u003cth\u003eU.S. Dollar Index\u003c/th\u003e\n\u003cth\u003eBroad Trade-Weighted Index\u003c/th\u003e\n\u003cth\u003eReal Effective Exchange Rate\u003c/th\u003e\n\u003c/tr\u003e\n\u003c/thead\u003e\n\u003ctbody\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Item\"\u003eCurrency composition\u003c/td\u003e\n\u003ctd data-label=\"U.S. Dollar Index\"\u003eSix fixed currencies\u003c/td\u003e\n\u003ctd data-label=\"Broad Trade-Weighted Index\"\u003eBroad range of trading-partner currencies\u003c/td\u003e\n\u003ctd data-label=\"Real Effective Exchange Rate\"\u003eTrading-partner currencies\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Item\"\u003eBasis for weights\u003c/td\u003e\n\u003ctd data-label=\"U.S. Dollar Index\"\u003ePredetermined fixed weights\u003c/td\u003e\n\u003ctd data-label=\"Broad Trade-Weighted Index\"\u003eTrade structure\u003c/td\u003e\n\u003ctd data-label=\"Real Effective Exchange Rate\"\u003eTrade structure and relative prices\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Item\"\u003eInflation reflected\u003c/td\u003e\n\u003ctd data-label=\"U.S. Dollar Index\"\u003eNo\u003c/td\u003e\n\u003ctd data-label=\"Broad Trade-Weighted Index\"\u003eNot in the nominal index\u003c/td\u003e\n\u003ctd data-label=\"Real Effective Exchange Rate\"\u003eYes\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Item\"\u003eSuitable use\u003c/td\u003e\n\u003ctd data-label=\"U.S. Dollar Index\"\u003eChecking the dollar’s market direction\u003c/td\u003e\n\u003ctd data-label=\"Broad Trade-Weighted Index\"\u003eAnalyzing the dollar’s value based on trade\u003c/td\u003e\n\u003ctd data-label=\"Real Effective Exchange Rate\"\u003eAnalyzing price competitiveness and real value\u003c/td\u003e\n\u003c/tr\u003e\n\u003c/tbody\u003e\n\u003c/table\u003e\u003c/div\u003e\n\u003cp\u003eThis distinction does not mean that the U.S. Dollar Index is wrong. Each indicator measures a different subject. The key is to choose the indicator that fits the question.\u003c/p\u003e\n\u003ch2\u003e\n\u003ca href=\"#common-mistakes\" class=\"anchor\" id=\"common-mistakes\"\u003e\u003c/a\u003eCommon Mistakes\u003c/h2\u003e\n\u003cp\u003eThe most common mistake is reading the U.S. Dollar Index as the dollar’s absolute value. The U.S. Dollar Index is a relative indicator compared with a currency basket. It does not directly measure commodity prices or domestic purchasing power.\u003c/p\u003e\n\u003cul\u003e\n\u003cli\u003eDo not interpret 100 as the current normal exchange rate.\u003c/li\u003e\n\u003cli\u003eThe relationship between index points and changes in the constituent currencies should be checked in the official U.S. Dollar Index formula.\u003c/li\u003e\n\u003cli\u003eDo not assume that the won–dollar exchange rate necessarily moves in the same direction.\u003c/li\u003e\n\u003cli\u003eDo not overlook the euro’s 57.6% weight.\u003c/li\u003e\n\u003cli\u003eDistinguish nominal exchange rates from real values that reflect inflation.\u003c/li\u003e\n\u003cli\u003eSeparate the index level from its direction of movement over a day or month.\u003c/li\u003e\n\u003c/ul\u003e\n\u003cp\u003eA rise in the U.S. Dollar Index alone also does not establish that the U.S. economy has improved. Interest-rate expectations and demand for safe-haven assets may work together. The index may also rise because the currencies of other major economies have weakened.\u003c/p\u003e\n\u003ch2\u003e\n\u003ca href=\"#indicators-to-review-when-assessing-the-dollars-value\" class=\"anchor\" id=\"indicators-to-review-when-assessing-the-dollars-value\"\u003e\u003c/a\u003eIndicators to Review When Assessing the Dollar’s Value\u003c/h2\u003e\n\u003cp\u003eFor practical assessments, the U.S. Dollar Index should be used together with indicators suited to the purpose. Investors can additionally check interest rates, inflation, and individual exchange rates. Companies should also consider their settlement currencies and foreign-currency assets and liabilities.\u003c/p\u003e\n\u003cp\u003eThe items to check can be divided as follows.\u003c/p\u003e\n\u003cul\u003e\n\u003cli\u003eMarket direction of the dollar: U.S. Dollar Index\u003c/li\u003e\n\u003cli\u003ePrice when exchanging into won: Won–dollar exchange rate\u003c/li\u003e\n\u003cli\u003eU.S. monetary conditions: Federal funds rate and market interest rates\u003c/li\u003e\n\u003cli\u003eDomestic purchasing power of the dollar: U.S. Consumer Price Index\u003c/li\u003e\n\u003cli\u003eCompetitiveness based on trade: Nominal and real effective exchange rates\u003c/li\u003e\n\u003cli\u003eChanges over a specific period: Time series using the same basis and observation time\u003c/li\u003e\n\u003c/ul\u003e\n\u003cp\u003eLooking at only one indicator may cause you to miss the reasons behind a change. It is also necessary to determine whether dollar strength is driven by factors related to the dollar itself. Weakness in the comparison currencies may be the primary cause.\u003c/p\u003e\n","tags":["Korean won","Foreign exchange market","Exchange rate","Dollar index"],"faqs":[{"question":"What does it mean when the Dollar Index is 100?","answer":"It means that the index is at the same level as the baseline value set in March 1973. It does not mean that purchasing power or prices in the United States are the same as they were then."},{"question":"Does the won-dollar exchange rate also rise when the Dollar Index rises?","answer":"Not necessarily. Since the won is not one of the currencies that make up the Dollar Index, it may move in a different direction depending on supply and demand specific to the won and conditions in South Korea's financial markets."},{"question":"Which currencies are included in the Dollar Index?","answer":"It includes the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc. The euro's weight and ranking should be checked in the official Dollar Index composition data."},{"question":"Is the Dollar Index a simple average?","answer":"No. It is calculated geometrically by applying predetermined weighted exponents to each currency's exchange rate. The signs of the exponents also vary depending on how the exchange rates are quoted."},{"question":"Does a rise in the Dollar Index mean that the U.S. economy is strong?","answer":"That conclusion cannot be drawn definitively. Expectations for U.S. interest rates and demand for safe-haven assets can affect it, and the index can rise solely because of weakness in counterpart currencies such as the euro."},{"question":"Can the Dollar Index show the dollar's purchasing power?","answer":"Not directly. Purchasing power within the United States should be assessed using inflation indicators such as the Consumer Price Index. The real effective exchange rate is more appropriate for examining differences in prices across countries as well."},{"question":"Do DXY and the Dollar Index mean the same thing?","answer":"In the market, DXY is used as a common name for the Dollar Index. However, it is advisable to check the ICE product description for the exact names and contract specifications of financial products."}],"sources":[{"url":"https://www.ice.com/products/194/US-Dollar-Index-Futures","title":"ICE U.S. Dollar Index Futures","type":"data_point"},{"url":"https://www.federalreserve.gov/releases/h10/current/","title":"Federal Reserve Foreign Exchange Rates H.10","type":"source"},{"url":"https://www.bis.org/statistics/eer.htm","title":"BIS Effective Exchange Rates","type":"source"}],"images":[{"id":1118,"url":"https://injoys.com/rails/active_storage/blobs/proxy/eyJfcmFpbHMiOnsiZGF0YSI6MTU3OTYsInB1ciI6ImJsb2JfaWQifX0=--843b9db6852b6686676db1058472efb7edc72422/ai-6530cc6b.webp","is_representative":true,"generation_method":"ai_photo","license":"ai_generated","mime_type":"image/webp","translations":{"ko":{"alt":"금융 창구 직원이 고객에게 게이지와 원형·상승선 차트가 표시된 화면을 설명하는 모습","caption":"직원이 여러 금융 지표 차트를 가리키며 고객에게 시장 흐름을 설명하고 있다.","description":null},"en":{"alt":"Financial clerk explaining screens with a gauge, pie chart, and rising line graph to a customer","caption":"A clerk uses financial charts to explain market trends to a customer.","description":null},"ja":{"alt":"金融窓口の担当者がメーター、円グラフ、上昇線グラフの画面を顧客に説明する様子","caption":"担当者が複数の金融指標を示しながら顧客に市場動向を説明している。","description":null},"es":{"alt":"Empleada financiera explica a una clienta pantallas con indicador, gráfico circular y línea ascendente","caption":"Una empleada señala varios gráficos financieros para explicar la tendencia del mercado.","description":null},"id":{"alt":"Petugas keuangan menjelaskan layar berisi indikator, diagram lingkaran, dan grafik naik kepada nasabah","caption":"Petugas menunjukkan beberapa grafik keuangan saat menjelaskan tren pasar kepada nasabah.","description":null},"pt":{"alt":"Atendente financeira explica telas com indicador, gráfico de pizza e linha ascendente a uma cliente","caption":"Uma atendente aponta gráficos financeiros para explicar a tendência do mercado à cliente.","description":null},"zh-hant":{"alt":"金融櫃檯人員向客戶解說顯示儀表、圓餅圖與上升折線圖的螢幕","caption":"櫃檯人員指著多項金融圖表，向客戶說明市場走勢。","description":null},"de":{"alt":"Finanzberaterin erklärt einer Kundin Anzeigen mit Messskala, Kreisdiagramm und steigender Kurve","caption":"Eine Beraterin erläutert einer Kundin anhand mehrerer Finanzdiagramme die Marktentwicklung.","description":null}}},{"id":1119,"url":"https://injoys.com/rails/active_storage/blobs/proxy/eyJfcmFpbHMiOnsiZGF0YSI6MTU4MDIsInB1ciI6ImJsb2JfaWQifX0=--b4564a23d2c3c00e109eed105a5efdd99a94ede4/ai-3e58b916.webp","is_representative":false,"generation_method":"ai_image","license":"ai_generated","mime_type":"image/webp","translations":{"ko":{"alt":"미국 국회의사당 동전이 놓인 환율계와 세계 통화 아이콘, 시장 차트, 장바구니 일러스트","caption":"세계 통화와 시장 지표를 통해 달러 가치의 변화를 시각적으로 나타낸다.","description":null},"en":{"alt":"Currency gauge with a U.S. Capitol coin, global currency icons, market charts, and a grocery basket","caption":"The illustration visualizes changes in dollar value through global currencies and market indicators.","description":null},"ja":{"alt":"米国議会議事堂の硬貨を配した為替計と各国通貨のアイコン、市場チャート、買い物かご","caption":"世界の通貨と市場指標を通じてドル価値の変動を視覚的に表している。","description":null},"es":{"alt":"Medidor de divisas con moneda del Capitolio, iconos monetarios, gráficos y cesta de compras","caption":"La ilustración representa los cambios del valor del dólar mediante divisas e indicadores de mercado.","description":null},"id":{"alt":"Pengukur mata uang dengan koin Capitol AS, ikon mata uang dunia, grafik pasar, dan keranjang belanja","caption":"Ilustrasi ini menggambarkan perubahan nilai dolar melalui mata uang global dan indikator pasar.","description":null},"pt":{"alt":"Medidor cambial com moeda do Capitólio, ícones de moedas, gráficos e cesta de compras","caption":"A ilustração representa as variações do valor do dólar por meio de moedas e indicadores de mercado.","description":null},"zh-hant":{"alt":"以美國國會大廈硬幣為中心的匯率儀表、全球貨幣圖示、市場圖表與購物籃","caption":"插圖透過全球貨幣與市場指標呈現美元價值的變化。","description":null},"de":{"alt":"Währungsanzeige mit US-Kapitol-Münze, globalen Währungssymbolen, Marktdiagrammen und Einkaufskorb","caption":"Die Illustration zeigt Veränderungen des Dollarwerts anhand globaler Währungen und Marktindikatoren.","description":null}}}],"published_at":"2026-09-07T19:34:00+09:00","updated_at":"2026-09-07T19:34:00+09:00","license":"cc_by","translation_status":"reviewed","available_locales":["ko","en","ja","es"],"data_locales":["ko","en","ja","es","id","pt","zh-hant","de"],"url":"https://injoys.com/en/articles/dollar-index-100-calculation-and-interpretation"}