Looking at Colin Twiggs US Dollar Index from incrediblecharts, I was wondering, what is it measured against? Currently, it's in it's downward trend, sitting at 77.50 .... 77.50 what? I don't get it. What do u measure the world reserve currency against to get a "measurement"? I'm sure some of you guys know the answer
It's measured against a weighted basket of other currencies. I believe wikiinvest(?) has the breakdown of the weighting. So when the us dollar index falls, it means the usd is depreciating faster than other currencies.
Its weighted against a basket of the Euro, Pound, Yen, and a couple other currencies like Swiss Franc, Swedish Kronor, etc. It doesn't include the Russian Ruble, Indian Rupee, Brazilian Real, Chinese Yuan, or many other big country currencies because it was devised back when capital markets were very Euro/Japan/American centric (and they still are but not to the same extent). Back then of course it had Deutsche Marks, French Francs, etc - but all that got condensed into the Euro. Essentially it shows how the USD is doing against Europe and Japan in currency strength.
The U.S. Dollar Index is computed using a trade-weighted geometric average of six currencies. The six currencies and their trade weights are: Euro......................57.6 % Japan/yen..............13.6 % UK/pound...............11.9 % Canada/dollar..........9.1 % Sweden/krona.........4.2 % Switzerland/franc.....3.6 % These contract specifications are subject to change. Please consult the FINEX if you have any questions.
