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Dollar Index by D este
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Dollar Index |
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Investment
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You can us e the dollar index is a weighted index of the strength of the US dollar vs. several other currencies. These other currencies and their approximate weights are the EUR 58%, JPY 13%, GBP 12%, CAD 9%, SEK 4.2% and CHF 3.5%. Why is the EUR weighted so heavily? Because it actually consists of over a dozen countries and their own economies, each with their own strengths and weaknesses. Similar to the S&P 500 index, when the Dollar Index is trending up, the strength of the dollar is increasing vs. this basket of currencies, and when trending down, the dollar is weakening vs. this basket of currencies. My "problem" with the dollar index and using it to help me trade is the weight of the EUR. Because the EUR is so heavily weighted, the dollar could be weakening against all the other currencies, yet if it is strengthening vs. the EUR, the dollar index could still be going up! This may lead a new trader to doubt what could be a great short trade on the USDCHF. A short trade on the USD/CHF means the dollar is getting weaker while the CHF is getting stronger.Dollar Index Trading
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