The US Dollar Index (DXY) Explained: What It Is, How It’s Weighted, and How to Trade It

Macro Guide, 2026

By Ken Chigbo, Founder, KenMacro, UK macro desk.

Find Ken on X @realkenchigbo · YouTube @Realkenchigbo · MACRO MASTERY Discord

Updated 2026-06-02

What the DXY is and the six currencies inside it

The US Dollar Index is a weighted geometric average of the dollar’s exchange rate against a fixed basket of six currencies, maintained today by ICE Futures. It was launched in March 1973 with a base value of 100, just after the Bretton Woods system of fixed exchange rates broke down and the major currencies began to float freely. The reading tells you the dollar’s strength relative to that 1973 base: above 100 the dollar is stronger against the basket than at the base, below 100 it is weaker. The six currencies and their approximate weights are the euro at 57.6 percent, the Japanese yen at 13.6 percent, the British pound at 11.9 percent, the Canadian dollar at 9.1 percent, the Swedish krona at 4.2 percent, and the Swiss franc at 3.6 percent. Those weights have changed only once in any meaningful way, when the euro replaced several legacy European currencies in 1999, so the basket is essentially frozen in its early-1970s shape. That frozen, euro-heavy composition is both the source of the index’s long history and the reason it is an imperfect picture of the dollar today.

Why the DXY is basically a euro mirror, and what it leaves out

Because the euro makes up well over half the basket, the DXY tracks EUR/USD more closely than anything else, and a DXY chart is in practice close to an upside-down EUR/USD chart. When the euro is strong the DXY is weak, and vice versa, almost regardless of what the other five currencies are doing. That has two consequences for traders. First, a lot of what looks like a dollar move on the DXY is really a euro move, so a soft euro print from the ECB can drive the index even when the dollar story has not changed. Second, the basket leaves out the currencies that matter most to the modern global economy. There is no Chinese yuan, despite China being the world’s second-largest economy and a huge trade partner, and no Mexican peso, Korean won, Indian rupee or any other emerging-market currency. So the DXY measures the dollar against a handful of developed-market peers, not against the world. For a broader picture the Federal Reserve publishes its own trade-weighted dollar indices, which include the yuan and EM currencies and often tell a different story from the DXY.

What moves the dollar index

The DXY is driven by the same forces that move the dollar generally, filtered through that euro-heavy basket. The biggest driver is the interest-rate differential between the US and the rest of the basket, especially the eurozone: when the Federal Reserve is expected to hold rates higher than the European Central Bank, capital flows toward dollar assets for the yield and the DXY rises. The second driver is risk sentiment, because the dollar is the world’s premier safe-haven and funding currency, so in a genuine risk-off panic the DXY usually jumps as global investors scramble for dollars regardless of the rate picture. The third is relative growth and the broad macro narrative: a US economy outperforming Europe and Japan pulls capital in and lifts the index. Because the euro and the yen together are over 70 percent of the basket, the DXY is really a story about the dollar versus a slowing Europe and a low-yielding Japan, which is why the index can stay firm for long stretches even when the dollar is weakening against higher-yielding or commodity currencies outside the basket.

How the desk uses the DXY

Three rules. First, treat the DXY as the dollar’s barometer and a confirmation gauge, not as the trade itself. The desk rarely trades the index in isolation; it uses it to confirm direction on the individual dollar pairs and gold. When the DXY is breaking higher and EUR/USD is breaking lower and gold is heavy, the dollar story is clean and the read is high-conviction. When the DXY says one thing and an individual pair says another, that divergence is a signal to wait, not to force a trade. Second, remember the euro mirror: before calling a DXY move a dollar move, check whether it is really a euro move, because a lot of DXY action is just EUR/USD in disguise. Third, watch the key technical levels on the index, because so many participants watch them that they become self-fulfilling reference points for the whole dollar complex. You can trade the index directly as a CFD or future for a pure dollar view, but most of the desk’s work uses it as the second instrument that confirms or vetoes a trade in a specific pair. The interest-rate-differential and safe-haven pieces linked below cover the two forces that move it most.

The desk’s checklist

1. Know what the number means. The DXY measures the dollar against six currencies, base 100 set in March 1973. Above 100 the dollar is stronger than at the base, below 100 weaker. It is the single most-watched gauge of broad dollar strength.
2. Respect the euro weighting. The euro is about 57.6 percent of the basket, so the DXY is close to an inverted EUR/USD chart. Before calling a move a dollar move, check whether it is really a euro move in disguise.
3. Remember what is missing. There is no Chinese yuan and no emerging-market currency in the basket. The DXY is the dollar versus developed-market peers, not versus the world. For the fuller picture, cross-check the Fed’s trade-weighted dollar indices.
4. Use it as a confirmation gauge. Trade the individual pair or gold, and use the DXY to confirm direction. When the index, the pair and gold all agree, the dollar read is clean. When they diverge, wait rather than force the trade.
5. Mark the key levels. So many participants watch the DXY’s round numbers and prior swing points that they become self-fulfilling reference levels for the whole dollar complex. Mark them and watch how price behaves around them.

Frequently asked

What is the US Dollar Index (DXY)?

The US Dollar Index, ticker DXY, is a single number that measures the value of the US dollar against a basket of six major currencies: the euro, the Japanese yen, the British pound, the Canadian dollar, the Swedish krona and the Swiss franc. It was set to a base of 100 in March 1973, so a reading of 105 means the dollar is about 5 percent stronger against the basket than at the base date. It is the most-watched gauge of broad dollar strength.

What currencies are in the dollar index and what are the weights?

Six currencies, with approximate weights: the euro at 57.6 percent, the Japanese yen at 13.6 percent, the British pound at 11.9 percent, the Canadian dollar at 9.1 percent, the Swedish krona at 4.2 percent, and the Swiss franc at 3.6 percent. The weights have been essentially frozen since the early 1970s, with the only major change being the euro replacing several legacy European currencies in 1999.

Why is the DXY so closely tied to the euro?

Because the euro makes up about 57.6 percent of the basket, more than all the other five currencies combined. That makes the DXY chart close to an upside-down EUR/USD chart, so a large share of any DXY move is really a euro move. It is the single most important thing to understand about the index: a soft euro can drive the DXY even when the dollar story itself has not changed.

Does the dollar index include the Chinese yuan?

No. The DXY contains no Chinese yuan and no emerging-market currencies at all, despite China being the world’s second-largest economy. It measures the dollar against six developed-market peers only. For a broader, more representative picture that includes the yuan and major trading partners, the Federal Reserve publishes its own trade-weighted dollar indices, which can tell a different story from the DXY.

How do you trade the dollar index?

You can trade the DXY directly as a CFD or futures contract for a pure broad-dollar view, but most traders use it as a confirmation gauge rather than a standalone trade. The cleaner approach is to trade an individual dollar pair or gold and use the DXY to confirm direction: when the index, the pair and gold all agree, the dollar read is high-conviction; when they diverge, it is a signal to wait.

Educational analysis only, not financial advice. KenMacro has commercial partnerships with some firms referenced and may earn a commission if you open an account, at no cost to you. Manage risk against your own circumstances.