Web Trader MT5
DXY($Y) is a gauge of the value of the dollar against a basket of six major currencies: the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc. The euro dominates the basket at approximately 57 percent, meaning that DXY is highly sensitive to EUR/USD moves and should not be mistaken for a fully global measure of dollar strength.
It was developed in 1973 when the Bretton Woods system failed, and floating exchange rates became the order of the day. The starting point was 100; anything above 100 indicates the dollar is stronger than initially, while anything below 100 indicates it is weaker.
DXY is the shorthand for dollar direction that traders, macro funds, and policymakers follow, despite their understanding of its limitations. An increase in DXY is likely to put pressure on dollar-priced commodities and on emerging market currencies with dollar-priced debt.
Example: When the Federal Reserve embarked on its aggressive cycle of rate-hiking in 2022, DXY shot up to around 95 and then above 114 without the Fed directly targeting any of those outcomes.
