U.S. Dollar Index (DXY)
Trader's Glossary · Broad market
Definition. The U.S. Dollar Index (DXY) shows the value of the dollar against a basket of six currencies: the euro, the yen, the pound, the Canadian dollar, the Swedish krona and the Swiss franc. The euro has by far the largest weight.
What the DXY is made of
| Currency | Weight in the basket |
|---|---|
| Euro (EUR) | 57.6% |
| Japanese yen (JPY) | 13.6% |
| British pound (GBP) | 11.9% |
| Canadian dollar (CAD) | 9.1% |
| Swedish krona (SEK) | 4.2% |
| Swiss franc (CHF) | 3.6% |
The index is calculated and published by ICE (Intercontinental Exchange). More than half of the basket is the euro, so the DXY largely mirrors EUR/USD in reverse. The Polish zloty, the yuan and the peso are not in the basket.
How to read the index level
- The reference point is 100 (March 1973). A DXY of 105 means the dollar is about 5% stronger against the basket than at the base point; 95 means about 5% weaker.
- Direction and speed of change matter more than the level itself: a 1% move in a single day is a big move for the DXY.
- The index is calculated almost around the clock, together with the currency market.
How it works
A rising DXY means the dollar is strengthening. A strong dollar can reduce US companies' foreign revenues once converted and tighten financial conditions.
How the DXY Affects the Dow Jones
The Dow Jones is made up of 30 large US companies, many of which sell abroad. A stronger dollar reduces their foreign revenue once converted back into dollars and usually goes hand in hand with higher bond yields, so on major data days (CPI, NFP, a Fed decision) a jump in the DXY often coincides with a drop in Dow Jones futures. That is why the DXY is a fixed part of the pre-session game plan: it shows whether the currency market confirms the move in stocks.
On days with major data I watch three things at once: Dow Jones futures, the U.S. 10-year Treasury yield and the DXY. When the dollar and yields rise together while the Dow falls, the market is reading the data as “higher rates for longer”. When the DXY falls and the Dow rises – the opposite. When these markets disagree, that is information too: the move in stocks has weaker confirmation.
This is context, not a decision trigger. “The dollar is up” on its own does not tell you where trades in Dow Jones futures are actually being executed – you only see that in order flow. The data calendar is in Macro data today, and the key releases are covered in U.S. CPI and Fed interest rates.
Example
After inflation data comes in above expectations, the dollar and bond yields rise and stock indices fall.
What to watch out for
The relationship between the dollar and stocks isn't constant; it changes over time.
Frequently asked questions
What is the U.S. Dollar Index?
The DXY measures the value of the U.S. dollar against a basket of six currencies. More than half of the basket is the euro.
Where can I check the dollar index live?
DXY quotes are published by ICE (Intercontinental Exchange) and shown by most financial websites. Our Macro data today page shows which U.S. releases can move the dollar and the Dow Jones on a given day.
Why is a strong dollar often bad news for the Dow Jones?
Many Dow Jones companies sell abroad, so a strong dollar reduces their revenue once converted. A strong dollar also usually goes hand in hand with higher bond yields.
Is the DXY the same as USD/PLN?
No. The Polish zloty is not in the DXY basket, so USD/PLN depends on the dollar index only indirectly, through EUR/USD and EUR/PLN.
Can you trade the dollar index?
Futures on the DXY are listed on ICE. It is a separate market with its own risk; this entry only explains how to read the index as background for the Dow Jones.
See also
Treasury yields, Fed interest rates, VIX (fear index), CPI, Order flow.
More in Hetman Capital Club
You'll find the full explanation with graphics, examples and exercises in the 📖 Order flow encyclopedia space, and its use in the live market in the 🔴 Live Room. Both are available to Club members (in Polish).
Educational content, not investment advice.