What the DXY is
The DXY, also called the US Dollar Index or simply the dollar index, measures the value of the US dollar against a fixed basket of major foreign currencies. When the index rises, the dollar has strengthened against that basket. When it falls, the dollar has weakened.
The index is published by ICE (Intercontinental Exchange), which also lists futures contracts on it. It started from a fixed base value set after major currencies moved to floating exchange rates. A reading above that base means the dollar is stronger against the basket than it was then. A reading below it means the dollar is weaker.
Traders use the DXY as a quick gauge of broad dollar strength. You will often see "DXY forex" analysis. This means reading the index alongside currency pairs such as EUR/USD or USD/JPY to tell whether a move comes from the dollar itself or from the other currency.
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Composition and weights
The basket holds these currencies:
| Currency | Code | Relative weight |
|---|---|---|
| Euro | EUR | Largest by far |
| Japanese yen | JPY | Second largest |
| British pound | GBP | Medium |
| Canadian dollar | CAD | Medium |
| Swedish krona | SEK | Small |
| Swiss franc | CHF | Small |
The index is a geometric weighted average of the dollar's exchange rate against each currency. Each rate is raised to the power of its weight, and the results are multiplied together. This means a move in a heavily weighted currency affects the index much more than the same move in a lightly weighted one.
The euro's weight is larger than all the other currencies combined. ICE publishes the exact weights and the index methodology. Check the current figures there rather than relying on copies on third-party sites.
The basket has changed only when the euro replaced several European currencies that used to be in it. The weights were not reset to reflect how US trade has shifted since then.
What the index measures, and what it does not
The DXY measures the dollar against a group of developed-market currencies, most of them European. It does not measure:
- the dollar against China's yuan, Mexico's peso, India's rupee or other large trading partners of the US
- the dollar against the Pakistani rupee (PKR) or other emerging-market currencies
- the dollar's purchasing power inside the US. That is what inflation data such as the Consumer Price Index tracks.
For PKR rates, use the official State Bank of Pakistan figures explained on our SBP exchange rates page. A rising DXY does not mean the PKR moves by the same amount, or even in the same direction on a given day.
Limitations: why "euro-heavy" matters
Because the euro dominates the basket, the DXY often behaves like an inverted EUR/USD chart. Several things follow from this:
- European news can move the DXY. A decision by the European Central Bank can push the index even if nothing changed in the US.
- Broad dollar moves can be hidden. If the dollar gains against Asian and emerging-market currencies while the euro holds steady, the DXY may barely move.
- The basket reflects an older trade pattern. Trade-weighted indexes from the Federal Reserve include more trading partners and are updated over time. Some analysts prefer them for that reason.
Read the DXY as "the dollar against Europe, Japan and a few other developed economies", not as "the dollar against the world".
How the mechanism works
Exchange rates move with the flow of money between currencies. The main drivers behind DXY moves are:
- Interest rate expectations. When markets expect the US Federal Reserve to keep rates higher than other central banks, dollar assets pay more. This tends to support the dollar. See Interest rates and Real interest rates.
- Bond yields. US Treasury yields often move together with the DXY, especially at shorter maturities. See Bond yields and FX.
- Risk sentiment. In periods of stress, investors often move into the dollar as a funding and safe-haven currency. In calm periods, money may flow out of the dollar into higher-yielding assets. See Risk-on, risk-off.
- Growth gaps. Stronger US growth than in Europe or Japan has historically tended to support the dollar against the basket.
How markets typically react to US events
These are common patterns, not rules. Reactions depend on what was already expected. This is covered in Economic surprises.
| Event | Typical reaction when the result is stronger or more hawkish than expected |
|---|---|
| FOMC meetings and the Fed dot plot | DXY often rises as rate expectations move up |
| Non-farm payrolls | DXY often rises on strong hiring |
| CPI and PCE inflation | DXY often rises if inflation keeps pressure on the Fed |
| Retail sales, PMI surveys | Moderate support for the dollar on strong data |
| ECB or Bank of Japan surprises | DXY moves opposite to the euro or yen |
The DXY also often moves against gold, which is priced in dollars, and against stock indices during risk-off periods. These links weaken or break at times.
For event dates, use official sources only. These include the Federal Reserve's published FOMC calendar, the US Bureau of Labor Statistics release schedule for jobs and CPI, and the Bureau of Economic Analysis schedule for PCE and GDP. Our Economic calendar guide explains how to read release times and consensus figures. For index values, use ICE or a data provider licensed by ICE. Values quoted on forums or social media can be delayed or wrong.
Using the DXY in analysis
- Compare a pair's move with the DXY. If EUR/USD falls while the DXY rises sharply, the move is mostly dollar strength. If EUR/USD falls and the DXY is flat, the move is probably about the euro.
- Watch the DXY around Fed events to see how far the market has priced in a decision.
- Combine it with technical analysis on the index chart. Remember that you cannot trade the index itself in the spot market. Exposure is usually through futures or CFDs.
Trading dollar-index products or currency pairs with leverage can lose money fast, including more than you expected from a single move. Read Risk management before using any leveraged product.
A note for traders in Pakistan
On remittances, per the SBP, remitting foreign exchange to overseas forex/margin/CFD platforms is not allowed through any payment channel (FERA s.5(1)). On offshore platforms, per the SECP, offshore forex/CFD platforms operate without regulatory approval in Pakistan, and per the SECP, offshore platforms have no Pakistani licence or oversight and offer no legal protection or recourse. Our Law and regulators page covers what this means in practice.
Frequent questions
What does DXY stand for?
It is the ticker used for the US Dollar Index. The index tracks the US dollar against a basket of major currencies, led by the euro.
Why does the DXY move almost opposite to EUR/USD?
The euro has the largest weight in the basket, larger than all the other currencies combined. When EUR/USD rises, the DXY usually falls, and the reverse.
Does the DXY include the Pakistani rupee or the Chinese yuan?
No. The basket contains the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc. For PKR, see SBP exchange rates.
Where can I find official DXY values?
ICE publishes the index and its methodology. Use ICE or a provider licensed by ICE for prices, and official US agency calendars for release dates.
Does a rising DXY always mean gold falls?
No. The two often move in opposite directions, but the link breaks at times, for example during periods of heavy safe-haven buying of both.
Is the DXY a good predictor of currency moves?
It describes the dollar's past and current moves against a basket. It does not forecast where any pair will go.
