There is another type of US currency index.
It was developed by the Federal Reserve and is now extensively used by many individuals, such as economists and currency analysts.
It is known as the “Trade Weighted US Dollar Index.”
It is available on the Federal Reserve Economic Data (FRED) page.
The broad index, also known as the trade-weighted US dollar index, measures the worth of the US dollar in relation to other foreign currencies.
It is a trade-weighted index that attempts to outperform the older AND privately held ICE U.S. Dollar Index (USDX) by employing more currencies and updating the weights on an annual basis.
The Fed intended to establish an index that would more accurately reflect the value of the dollar against foreign currencies based on how competitive US goods are in comparison to goods from other countries.
It was established in 1998 in order to stay up with US trade.
The Trade-Weighted U.S. Dollar Index
The Federal Reserve Bank of St. Louis publishes “weighted averages of the foreign exchange value of the US dollar against a broad group of major US trading partners’ currencies.”
The index’s present weighting (in percentage) is as follows, from strongest to weakest:
| COUNTRY | WEIGHT(%) |
|---|---|
| Eurozone | 18.947 |
| China | 15.835 |
| Canada | 13.384 |
| Mexico | 13.524 |
| Japan | 6.272 |
| United Kingdom | 5.306 |
| Korea | 3.322 |
| Taiwan | 1.95 |
| Singapore | 1.848 |
| Brazil | 1.979 |
| Malaysia | 1.246 |
| Hong Kong | 1.41 |
| India | 2.874 |
| Switzerland | 2.554 |
| Thailand | 1.096 |
| Australia | 1.395 |
| Russia | 0.526 |
| Israel | 1.053 |
| Sweden | 0.52 |
| Indonesia | 0.675 |
| Saudi Arabia | 0.499 |
| Chile | 0.625 |
| Philippines | 0.687 |
| Colombia | 0.604 |
| Argentina | 0.507 |
| Total | 100 |
The USDX and the trade-weighted US dollar index vary primarily in the basket of currencies used and their relative weights.
Countries from all over the globe are represented in the trade-weighted index, including some developing countries.
Given the state of global commerce, this index is likely a more accurate reflection of the value of the US dollar around the world.
The weights are calculated using annual trade statistics.
The broad index weights can be viewed here.
