swissaustrian
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The dollar index (DXY) is a synthetic index. It is calculated as a weighted geometric mean of the dollar's value compared only with "basket" of 6 other major fiat currencies which are:
Euro (EUR), 57.6% weight
Japanese yen (JPY) 13.6% weight
Pound sterling (GBP), 11.9% weight
Canadian dollar (CAD), 9.1% weight
Swedish krona (SEK), 4.2% weight and
Swiss franc (CHF) 3.6% weight
USDX started in March 1973, soon after the dismantling of the Bretton Woods system. At its start, the value of the US Dollar Index was 100.000. It has since traded as high as 164.7200 in February 1985, and as low as 70.698 on March 16, 2008.
The makeup of the "basket" has been altered only once, when several European currencies were subsumed by the Euro at the start of 1999.
http://en.wikipedia.org/wiki/U.S._Dollar_Index
That is the problem: It was constructed 40 years ago and doesn't reflect the current economic landscape at all. Moves in the Euro are dominating the index. There only one Asian currency in there, JPY. Major currencies like CNY, BRL or RUB aren't included.
The DXY is still seen as the measure of the dollars value in global trade, however. It's also having a significant on precious metal performances in USD.
Just looking at the composition, you can see that three largest parts are currencies that are in trouble: EUR, JPY, GBP. Euroland is permanent crisis since 2008, that has weighed on EUR/USD. The Japanese are currently going kamikaze. GB has been printing like mad for years. What this means is that the DXY is essentially comparing trash (USD) to garbage (EUR, JPY, GBP).
I think that we'll see a clearer decoupling of pm performance from DXY moves in the future for that reason.
Euro (EUR), 57.6% weight
Japanese yen (JPY) 13.6% weight
Pound sterling (GBP), 11.9% weight
Canadian dollar (CAD), 9.1% weight
Swedish krona (SEK), 4.2% weight and
Swiss franc (CHF) 3.6% weight
USDX started in March 1973, soon after the dismantling of the Bretton Woods system. At its start, the value of the US Dollar Index was 100.000. It has since traded as high as 164.7200 in February 1985, and as low as 70.698 on March 16, 2008.
The makeup of the "basket" has been altered only once, when several European currencies were subsumed by the Euro at the start of 1999.
http://en.wikipedia.org/wiki/U.S._Dollar_Index
That is the problem: It was constructed 40 years ago and doesn't reflect the current economic landscape at all. Moves in the Euro are dominating the index. There only one Asian currency in there, JPY. Major currencies like CNY, BRL or RUB aren't included.
The DXY is still seen as the measure of the dollars value in global trade, however. It's also having a significant on precious metal performances in USD.
Just looking at the composition, you can see that three largest parts are currencies that are in trouble: EUR, JPY, GBP. Euroland is permanent crisis since 2008, that has weighed on EUR/USD. The Japanese are currently going kamikaze. GB has been printing like mad for years. What this means is that the DXY is essentially comparing trash (USD) to garbage (EUR, JPY, GBP).
I think that we'll see a clearer decoupling of pm performance from DXY moves in the future for that reason.