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Chapter 27, Part I. Let’s Meet with Dollar Index.

Discussion in 'Complete Trading Education- Forex Military School' started by Administrator, Feb 17, 2012.

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  1. Administrator

    Administrator Just Administrator :-)

    Sep 24, 2007
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    Part I. Let’s Meet with Dollar Index.

    Commander in Pips: Well, we’ve taken a solid jump forward in terms of different analysis tools, so probably we will take a rest and switch to an easier context for awhile. I offer you to speak about the US dollar index.

    Pipruit: Index? And what is this index?​


    Commander in Pips: Do you know something about stock indexes – S&P500, DJIA?

    Pipruit: Yes. I’ve heard that they include average cost of all equities that they contain at some principle of averaging. So, it’s some kind of average value of stock market, some kind of barometer.
    Commander in Pips: Right, precisely speaking, the value of particular equities in the index is not equal to each other – it based on the value of the particular company (capitalization). Larger companies have larger value in the index, while smaller companies - smaller values.

    So, the dollar index is an analogue of a stock index but for the Forex market. It reflects the weighted average cost of the US Dollar compared to some other currencies. The collection of these currencies is called a “Currencies Basket”. This basket includes Euro (EUR), Japan Yen (JPY), British Pound (GBP), Canadian Dollar (CAD), Swiss Franc (CHF) and Sweden Crone (SEK). Weights of each currency are also different:

    Source: Federal Reserve, Intercontinental exchange (ICE)

    Pipruit: And why does the EUR have the largest value?​
    #1 Administrator, Feb 17, 2012
    Lasted edited by : Oct 8, 2016
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