What Is The US Dollar Index

The US Dollar Index is the value of the greenback versus a basket of currencies. Each one of this currencies have different weight in the index.

EUR=57.6%, JPY 13.6%, GBP 11.9%, CAD 9.1%, SEK 4.2%, CHF 3.6%

The US Dollar Index goes up in value when the US dollar gains, and most other currencies within the index fall in value. The US Dollar Index can be trade like any other CFD equity or a Forex pair.

Some trader like to trade the US Dollar Index in opposite direction against currencies forming the index such EUR, JPY and GBP. Usually the hedging is done when news in the market favours more an specific currency. The disadvantage is that in order to hedge against the index a bigger outlay of cash might be needed.

The reason for if, is that 1 EUR/USD pair might move increasing/decreasing in value by 10 cents a pip, where 1 US-Dollar index would move by $1 a pip.

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