The current U.S. dollar banknotes in circulation are all versions of banknotes issued since 1929. Appeared after the passage of the American Coinage Act in 1792. The current US dollar issuance is controlled by the Federal Reserve System. Since 1913, the United States established the Federal Reserve System and issued Federal Reserve Notes. More than 99% of the current banknotes in circulation are Federal Reserve Notes. The U.S. dollar issuance authority is Congress, and the Federal Reserve Bank is responsible for the specific issuance business. After World War II, the United States forced the major European powers to agree that international currency settlement must be settled in US dollars, so the US dollar is widely used as a reserve currency in countries other than the United States. The U.S. dollar is the base currency in foreign exchange exchanges and the main currency in international payments and foreign exchange transactions, and it occupies a very important position in the international foreign exchange market.

The formula for calculating the US dollar index is: USDX = 50.14348112 × EURUSD ^-0.576 × USDJPY ^0.136 × GBPUSD ^-0.119 × USDCAD^ 0.091 × USDSEK^ 0.042 × USDCHF ^0.036.

Several pieces of information can be found from the above formula:

1. The constant 50.14348112 is the number obtained by the inverse operation in order to set the final result to the integer 100 when the dollar index was originally designed. This number cannot be changed.
2. The U.S. dollar index contains six currency pairs, and the weights are:

It should be reminded that the weight here is not as simple as multiplying the exchange rate by the percentage, but the N-th power of the exchange rate, where N is the middle column of decimals in the above table. In addition, as long as USD is not in the front of the currency pair, its weight is negative, such as EURUSD and GBPUSD.

Take the exchange rate on December 15, 2020 as an example:

EURUSD exchange rate is 1.21367, and its -0.576 power is 0.89445

USDJPY exchange rate is 104.045, its 0.136 power is 1.88079

GBPUSD exchange rate is 1.33205, and its -0.119 power is 0.96645

USDCAD exchange rate is 1.27629, and its 0.091 power is 1.022448

USDSEK exchange rate is 8.4133, and its 0.042 power is 1.09357

USDCHF exchange rate is 0.88675, and its 0.036 power is 0.99568

Bring the six results obtained into the above dollar index calculation formula:

USDX=50.14348112 ×0.89445 ×1.88079×0.96645×1.022448×1.09357×0.99568 =50.14348112 ×1.81001997

The final number is 90.7607021925. After taking two decimal places according to the habit, the final value is 90.76, which is the current dollar index quotation.

1. SEK is the currency of Sweden, called the crown; CHF is the currency of Switzerland, called the Swiss franc. Sweden joined the European Union in 1995, but it is not part of the Eurozone. Switzerland has neither joined the European Union nor used the Euro. Sweden and Switzerland are both small European countries, but both have their own irreplaceable pillar industries, such as the former’s industry and the latter’s financial industry.

summary:

Although many trading products are not included in the dollar index basket of currencies, they will still be affected by dollar fluctuations because they are directly or indirectly priced in dollars, such as gold and crude oil. In the actual trading process, the most obvious impact of the US dollar index is EURUSD, because the weight of the euro is 0.576, the highest among all currencies. Because the renminbi is not included in the calculation formula of the US dollar index, there is no strong positive correlation between the fluctuation of USDCNH and the US dollar index, and its trend is relatively independent.