What is the US Dollar Index? Why pay attention to the US dollar index?

　　The United States is currently one of the most powerful countries in the world.Due to the United States’powerful dominance and dominance,its currency,the U.S.dollar,also dominates the position of the first brother in the currency industry.The strength of the U.S.dollar’s disdain for the world mainly comes from the huge group of aircraft carriers and fighters behind it.strong economic system.Since the end of the 19th century,the U.S.economy has rapidly developed into one of the most powerful countries in the world.Since then,the U.S.dollar has established its position in the currency industry.After the end of World War II,Europe was devastated by the war and the economy was severely slumped.The U.S.dollar became the world’s largest power in one fell swoop.Become the center of the global monetary system.The world's major precious metals and energy products are priced in US dollars,and the US dollar has strong liquidity,making the US dollar the strongest foreign exchange currency.

　　The full name of the US dollar index is USDollarIndex,and the code is USDX.The U.S.dollar index is derived from the average exchange rate of the U.S.dollar against a basket of six major international foreign exchange currencies:the Japanese yen(JPY),the euro(EUR),the British pound(GBP),and the Swiss franc.(CHF),Canadian Dollar(CAD)and Australian Dollar(AUD),as the name suggests,the US Dollar Index is an index,not a direct reference to the US dollar.The U.S.dollar index is an indicator that comprehensively reflects the exchange rate of the U.S.dollar in the international foreign exchange market,and is used to measure the degree of change in the exchange rate of the U.S.dollar against a basket of currencies.The principle of the index is to measure the strength of the U.S.dollar by calculating the comprehensive rate of change of the U.S.dollar and the six major baskets of currencies.The strength of the U.S.dollar index is equal to the weakening of other currencies,while the strength of other currencies is the weakening of the dollar.The overall relationship is such a relationship.Among the six major currencies exchanged by the US dollar,the proportion of the euro is as high as 57%,which exceeds the sum of the remaining five currencies.Therefore,the euro has the greatest impact on the US dollar index,and the second is the British pound,which accounts for 11.9%,so The trading volume of the euro and the pound in the foreign exchange market is also very large,because they are the two most powerful currencies in the world besides the dollar.

　　Once the US dollar index rises,it means that the US dollar is appreciating,and the major commodities in the world are denominated in US dollars.The rise of the US dollar means that the price of the commodity is more expensive,then the corresponding commodity price opportunity will be affected and fall.The appreciation of the U.S.dollar is good for the entire national economy of the United States,and it can increase the purchasing power of the country,but it has a greater impact on the import and export industry,because the appreciation of the currency will reduce the price of export commodities,which will make export profits weak,so The trend of the US index is closely related to our lives.As a major exporter,Taiwan is also greatly affected by the fluctuation of foreign exchange currencies.

　　Super liquidity is the biggest feature of the U.S.dollar,and a large part of daily currency transactions contain U.S.dollars.Commodities such as gold and crude oil are priced in US dollars.Even during Asian trading hours,the U.S.dollar accounts for as much as 93 percent of currency trading.To be realistic,we can take the New York Stock Exchange and the US bond market as an example.Companies listed on the New York Stock Exchange have a market capitalization of$28.5 trillion,accounting for 78%of the world's stock market valued at$36.6 trillion.Similarly,the US holds 31.2 trillion of the$82.2 trillion global bond market.To some extent,every transaction involves dollars.

　　Both the Federal Reserve and the U.S.Treasury have adhered to a"strong dollar"policy over the past few decades.They argue that both monetary and fiscal policy should be in the service of a strong dollar,because it's not only good for the US,but the world as well,and the currencies of emerging countries are priced in dollars.

　　The US dollar is not only a well-known safe-haven currency but also the world's reserve currency.The reason behind this is that many countries rely on the US dollar to measure the value of their currencies.When a country does this,its government agrees to buy or sell the country's currency at a fixed price relative to the dollar,and while the government can increase or decrease the money supply,they maintain a corresponding dollar reserve.This process reflects the importance of the U.S.dollar in the world,as it means that some economies are completely dependent on the U.S.dollar,and if the U.S.dollar price falls significantly,it will have profound negative consequences for those countries that use the U.S.dollar to measure the value of their currencies influence.

　　The U.S.dollar is the pricing and settlement currency of the current world system.The exchange rate of the U.S.dollar is one of the important factors affecting the price fluctuations of gold,silver or crude oil.The monetary policies of various countries are closely related to commodity prices,but the U.S.dollar has the highest correlation.Mainstream commodities are priced in US dollars.When the US dollar appreciates,the denominated US dollar will be more valuable,and vice versa,the price of commodities will be lower.

　　For example,in the early stage,the United States kept printing money to supply liquidity to the market.When the United States adopted a loose monetary policy,due to the decline in interest rates and the flood of liquidity,the country’s money supply increased and inflation increased.The U.S.dollar becomes worthless(depreciates),which in turn causes commodity prices to rise,as U.S.dollar-denominated commodities are less expensive and therefore more attractive to buy.The sharp rise in precious metal and energy prices this year has something to do with the loose monetary environment in the United States and the depreciation of the dollar.

　　To make another analogy,the price of international crude oil is denominated in US dollars,and the impact of the US dollar on the price of crude oil is much higher than that of other currencies,such as the euro and the pound.Therefore,once the US dollar starts to depreciate,the price of crude oil denominated in US dollars will appear cheap,which will promote the increase in demand,thereby supporting the rise in oil prices;on the contrary,when the US dollar appreciates,the price of crude oil will be more expensive or even a premium.,then the demand for crude oil will drop,which will bring pressure to oil prices.

　　Since the U.S.dollar index cannot be traded directly,it can only be traded against the U.S.dollar currency pair,which is divided into U.S.and non-U.S.currencies.The U.S.currency refers to the U.S.dollar as the base currency,while the non-U.S.currency refers to the USD as the quote currency.How to distinguish?Teach you a super simple and easy way to get started!First find a set of currency pairs.The US dollar is in front of the US currency,such as US Japan(USDJPY)/US Swiss(USDCHF)/US Canada(USDCAD),these currency pairs are consistent with the trend of the US dollar.The dollar is first,and the currency being converted is last.For example,the quotation of USD/JPY is 113.95,which means that 1 USD can be exchanged for 113.95 yen.If the US and Japan continue to rise,it means that the US dollar is appreciating,while the Japanese yen is depreciating,because at this time,1 US dollar can be exchanged for more yen;if A fall in the US and Japan means that the dollar is depreciating,while the yen is rising,because 1 dollar can only be exchanged for fewer yen.

　　After the US dollar,they are collectively referred to as non-US currencies,such as GBPUSD(GBPUSD)/Europe and the United States(EURUSD)/Australia and the United States(AUDUSD).These currency pairs are followed by the US dollar and are mainly used as the currency to be exchanged.Currencies move in opposite directions to the dollar.For example,the quotation in Europe and the United States is 1.1598,which means that the current 1 euro can be exchanged for 1.1598 US dollars.If the US dollar index rises,it means that 1 euro can only be exchanged for less US dollars.At this time,the euro depreciates and the US dollar appreciates,and the price in Europe and the United States shows a decline.

　　When the US dollar is used as the base currency(referred to as the US system),the number of transactions in USD/XX is measured in US dollars,and the value of each point is measured in XX.Four or two digits after the decimal point constitute a point.For example,the two decimal places of the US dollar against the Japanese yen(USDJPY)are one point.From 106.610 to 106.650,it has increased by 4 points,and the gains and losses are marked by XX.For 1 standard lot,the value of each point change is 10XX.For example,the current exchange rate of USD/XX is 1.4000,then the value of 1 standard lot is USD 14,and the calculation of margin trading is based on USD.With a leverage of 1:100,for example to trade USD/CAD of USD 100,000,a margin of USD 1,000 is required.

　　When the US dollar is used as the quotation currency(abbreviated as non-US),XX/USD is traded at the XX price,and the value of each point is priced in US dollars.In exchange rates expressed in XX/USD,four or two decimal places are one point.For example,the last four decimal places of the euro against the dollar(EURUSD)are one point,and a drop from 1.09090 to 1.09020 is a drop of 7 points.

　　Gains and losses are denominated in U.S.dollars.In the case of 1 standard lot,the value of each change is 10 US dollars,and the calculation of margin trading is based on US dollars.For example,if the current exchange rate of XX/USD is 0.8900 and the leverage ratio is 100:1,the minimum margin required to trade a standard lot should be$890.As the exchange rate of XXX/USD increases,the demand for USD margin will increase with of increase.

　　How to invest through changes in the US dollar index?For example,we can observe the difference between the economic development of the United States and the economic development data of other countries,which is a good start for dollar transactions.For example,rising retail sales in the US and optimism about employment conditions in the US give you good reasons to short GBP/USD(GBPUSD).

　　The U.S.Dollar Index(USDX)tracks the U.S.dollar's performance against a basket of currencies and is a barometer of the greenback's strength.By regularly checking the U.S.dollar index,you can find out which direction the U.S.dollar is moving.The dollar index is in an uptrend,indicating that it is possible to short the euro/dollar(EURUSD)trade.

　　Talk of a hike in the benchmark federal funds rate suggests that U.S.assets could yield high yields,prompting investors to buy dollars as much as they can.Don't be left behind this time!Long all US-based currencies(USD as the base currency)and short non-US currencies(USD as the quote currency).

　　We need to pay attention to the outlook for the Fed's monetary policy,which is usually part of the speech of the Fed officials,which usually provides us with clues to the direction of the dollar.For example,hawkish remarks can be used as a signal to go long on the USD/JPY(USDJPY),and conversely,dovish remarks can be used as a signal to short USD/JPY.