Now that we know what the basket of currencies are, let’s get back to that “geometric weighted average” part. Because not every country is the same size, it’s only fair that each is given appropriate weights when calculating the U.S. Dollar Index. Check out the current weights:
As you can see, with its 12 countries, euros make up a big chunk of the U.S. Dollar Index. The other five make up less than 43 percent.
Here's something interesting: When the euro falls, which way does the U.S Dollar Index move?
The euro makes up such a huge portion of the U.S. Dollar Index, they might as well call this index the "Anti-Euro Index". Because the USDX is so heavily influenced by the euro, people have looked for a more "balanced" dollar index. More on that later though. First, let's go to the charts!
source: www.babypips.com
