How the US Dollar Index Works - FXCM

How it Works

The Dow Jones FXCM Dollar Index Basket (USDOLLAR) was developed by traders for traders allowing you to take advantage of US Dollar appreciation or depreciation with precise tracking and maximum liquidity.

The Index Basket

The index basket is designed to be as easy to understand as it is to trade. It reflects the change in value of the US dollar measured against a basket of the most liquid currencies in the world:

Index Basket
  • Euro: The EUR/USD is the most heavily traded currency pair in the world.
  • British Pound: Highly liquid and popular with forex traders, the pound retains great significance as the UK remains an important global financial hub.
  • Japanese Yen: A mainstay of the forex carry trade, the yen represents the third-largest economy in the world.
  • Australian Dollar: A titan in the fast-growing Asia/Pacific region, the AUD gives our index high yields and a link to commodity markets.

The Dow Jones FXCM Dollar Index began on January 1, 2011, at a value of 10,000.00. It represents an equivalent $10,000 position in each of the currencies that make it up. It rises when the Dollar rises against the Euro, the British Pound, and the Australian Dollar and falls as the Dollar depreciates compared to these currencies. For example, if the US dollar rallies 100 pips against each the EUR, GBP, JPY, and AUD, the index will appreciate by approximately 100 points. It's that simple.

Vital Statistics
Target Spread1 2 to 3 pips
Margin Requirement2 50 USD per lot
Minimum Trade Size 1 lot3
Pip cost 1 USD per lot traded
Index Average Daily Range 38 pips in 2010

2 Trading on Margin: Trading on margin can both positively and negatively affect your trading experience as both profits and losses can be dramatically amplified.

3 1 lot is equivalent to 10,000 USD on January 1,2011. The value of the lot changes as the price of USDOLLAR changes.

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