The US Dollar index should be called the EURUSD index
The U.S. Dollar index is widely followed as the definitive index for USD strength and weakness. Some people look at this index as being extremely useful.
I do not.
It isn’t that there is no information about the USD in this index, but rather that it should be called the EURUSD index. The US Dollar index is an index of the USD against a basket of currencies – so far, so good.
Here’s the kicker – The EURUSD makes up 59% of the value of the USD index.
The other 5 currencies that are in the index only make up 40% of the index. If you’re looking at the real value of the USD against other currencies, it’s best to look at them one by one, rather than looking at the U.S. Dollar index.
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Michael Sankowski spends a lot of his time applying quantitative mathematics to financial markets. When he's not playing the guitar, he has been a professional trader for 20 years. He's traded billions of dollars on four continents and is a well-known financial writer. He's a CFA, CAIA, and has created patented Futures products. He's here to help you make more money (and especially not lose your money).
