Posts Tagged ‘New York Board of Trade’

DOLLAR INDEX “BASKET OF CURRENCIES”

The US Dollar Index (USDX) is an index (or measure) of the value of the United States dollar relative to a basket of foreign currencies. It is a leading benchmark for the international value of the US dollar and the world’s most widely recognized, publicly-traded currency index. The U.S. Dollar Index is the creation of the New York Board of Trade (NYBOT). It was established in 1973 for tracking the value of the USD against a basket of currencies, which, at that time, represented the largest trading partners of the United States. The baseline of 100.00 on the USDX was set at its launch in March 1973.

.

Updated on………

USDX is updated whenever US Dollar markets open, which is from Sunday evening New York time (early Monday morning Asia time) for 24 hours a day to late Friday afternoon New York time.

.

Composition

It is a weighted geometric mean of the dollar’s value

compared only with:

·Euro (EUR), 57.6% weight                                    

·Japanese yen (JPY), 13.6% weight

·Pound sterling (GBP), 11.9% weight

·Canadian dollar (CAD), 9.1% weight

·Swedish krona (SEK), 4.2% weight and

·Swiss franc (CHF) 3.6% weight.

The importance of the trade weighted average between the currencies represents a more realistic asset value of underlying commodities than the actively traded dollar.

.

Monitoring

By using the Dollar Index, investors can take advantage of moves in the value of the US dollar relative to a basket of world currencies or can hedge their portfolio of assets against the risk of a move in the US dollar in a single transaction. The rise and fall of the US dollar is said to be responsible for many movements in stock and commodity markets. When it looks like the US dollar is getting strong then there is a common conclusion that it will leads to weaker commodity prices.

.

A Weak Dollar Can Make Commodities More Profitable

.


Gone are the days when the simple fundamentals of demand and supply were used to predict prices. As rules of the game have been modified, the long-term trends are sometimes defined trend of dollar index. The increasing presence of index investors in commodities markets precipitated a fundamental process of financialization amongst the commodities markets, through which commodity prices now become the resultant of spillover effects of dollar index. Rising dollar eventually produces lower commodity prices. A falling dollar has the exact opposite effect; it is bullish for commodities. Importantly, as long as the U.S. dollar index continues to trend lower commodity futures markets are likely to continue to see their prices trend generally higher.

.

.

The price of all US Dollar denominated commodities, like gold, will change to reflect the fact that it will take fewer or more dollars to buy that commodity. So it’s quite possible, in fact it’s almost always the case that a portion of the change in the price of gold is really just a reflection of a change in the value of the US Dollar. Sometimes that portion is insignificant. But often the opposite is true where the entire change in the gold price is simply a mathematical recalculation of an ever-changing US Dollar value.

.

Therefore, in order to determine commodity price trends, one needs to develop a comprehensive and holistic approach between U.S dollar index & commodities.

.

Stay Tuned for More updates :)

.

Note : For More Latest Industry, Stock Market and Economy News and Updates, please click here