Trade Weighted US Dollar Index
The Trade Weighted U.S. Dollar Index (also known as "The Broad Index " ) is a ratio that compares the value of the U.S. dollar by a currency basket of 26 currencies. The index is the trade-weighted average compared to these currencies. It was founded in 1998 by the U.S. Federal Reserve ( FED) published for the first time.
- 4.1 Historical Overview
- 4.2 Annual Development
Concept
The trade -weighted U.S. Dollar index represents the ratio of 26 currencies against the U.S. dollar, the euro is taken into account with the trading volume from 14 EU countries. All currencies are expressed in units of currency per U.S. dollar. The U.S. central bank calculates the effective exchange rates in the index with a broad group (The Broad Index ) between trading partners. This splits into a main group (The Major Currencies Index ) and in a subgroup ( OITP - Other important trading partners ).
In the main group the following 7 currency areas are included: Euro, Canadian dollar, Japanese yen, British pound, Swiss franc, Australian dollar and Swedish krona. Based on the course of the trade-weighted U.S. Dollar Index can be the strength or weakness of the U.S. dollar read. A rising index represents an appreciation of the U.S. dollar against the currencies in the currency basket, a falling index, however, a devaluation.
Relationships to commodity indices are recognizable. A falling trade weighted U.S. dollar index is rising commodity prices. This is especially true for agricultural commodities and the price of oil. Even the price of gold is correlated with a falling index. So the trade-weighted U.S. dollar index marked on May 2, 2011, a multi-year low and the price of gold in U.S. dollars on the same day an all time high.
In addition to the Trade Weighted U.S. Dollar Index U.S. Federal Reserve ( Fed), there's the U.S. Dollar Index ( USDX ), which compares the value of the U.S. dollar by a currency basket of six currencies. The USDX is the geometric weighted average compared to these currencies. It was introduced in 1973 and is listed on the exchange ICE Futures U.S..
The index of the FED measures against the U.S. dollar index much more accurately the value of the U.S. dollar because the weighting of the FED, the competitiveness of U.S. goods relative to other countries and trading partners.
A similar calculation method such as the U.S. dollar index using the weighted arithmetic Euro Currency Index and the trade-weighted euro Effective Exchange Rate Index of the European Central Bank ( ECB).
Calculation
Three weights
The Trade Weighted U.S. Dollar Index U.S. Fed weighted individual countries or currency areas with a combination of three different bilateral weights. This includes imports, exports and the third- market transactions. The combination of these three sections is the weighting of the Trade Weighted U.S. Dollar Index.
Linking the weights
The coefficients of the three weights were selected to enter the competition from imports in U.S. markets and competition from U.S. exports in foreign markets the same weights. In addition, the bilateral export weights and the weights for the detection of the competition will be given the same meaning in third markets.
Composition
The Trade Weighted U.S. Dollar Index (The Broad Index ) contains the following currencies (as of April 18, 2011 ).
History
Historical Overview
The Trade Weighted U.S. Dollar Index launched the U.S. Federal Reserve (FED ) end of 1998. The broad group in the index (The Broad Index ) was until 1995 (daily rates) and to 1973 ( monthly rates) calculated back. The recalculation of the main group (The Major Currencies Index ) was carried out until 1973 (daily rates).
In the 1970s, a multi-year upward movement of the Broad Index began. He rose to March 1985 at 126.0 per cent to a high of 69.24 points. With the devaluation of the U.S. dollar against most currencies, the index dropped to December 1987 to a low of 58.64 points. This represents a decline from the 1985 level of 15.3 percent. The low marking the end of the short downward motion.
In the following 15 years, the trade-weighted U.S. dollar index was back on the way up. On 27 February 2002, the index marked with 130.24 points, an all time high. The weakness of the U.S. dollar against almost all currencies dropped the index in the years to fall again. On 15 July 2008, the Broad Index fell to a low of 94.79 points. This represents a decline from the record high of 2002 by 27.2 percent.
In the course of the international financial crisis in the U.S. real estate crisis originated in the summer of 2007, the index began to rise again. From the autumn of 2008, the crisis had an increasing impact on the real economy. As a result, stocks and commodities slumped worldwide. The U.S. dollar has served as a safe haven and appreciated against most currencies. On 3 March 2009, the index stood at 115.04 points, higher at 21.4 than in July 2008.
The high budget deficit, growing national debt of the United States and doubts about the creditworthiness of the country weakened the dollar in the coming years. On 26 July 2011, the Trade Weighted U.S. Dollar Index (The Broad Index ) fell by 93.95 points to its lowest level since 1995.
Annual development
The table shows the annual high, low and closing levels of the back-calculated to 1973 Trade Weighted U.S. Dollar Index (The Broad Index ).
¹ December 31, 2012