US Dollar Index (DXY)
Dollar strength vs major currencies
Understanding the US Dollar Index (DXY)
The US Dollar Index (DXY) measures the value of the US dollar against a basket of six major currencies: the Euro (EUR), Japanese Yen (JPY), British Pound (GBP), Canadian Dollar (CAD), Swedish Krona (SEK), and Swiss Franc (CHF). The Euro carries the largest weight at approximately 57.6%.
DXY and Gold: The Inverse Relationship
Gold and the US Dollar Index historically share a strong inverse correlation. When the dollar strengthens (DXY rises), gold prices tend to fall because gold becomes more expensive for holders of other currencies, reducing demand. Conversely, when the dollar weakens (DXY falls), gold prices tend to rise as it becomes cheaper in non-USD terms and investors seek alternative stores of value.
Tracking the DXY alongside precious metals gives traders and investors context for price movements. A sharp decline in DXY often signals potential upside for gold, silver, and other commodities priced in US dollars.