What is DXY (Dollar Index)?
USD strength vs a basket of major currencies — the gravitational constant of every cross-asset price.
Definition
DXY measures USD against a fixed basket: EUR (57.6%), JPY (13.6%), GBP (11.9%), CAD (9.1%), SEK (4.2%), CHF (3.6%). It is *not* trade-weighted; the eurozone weight dominates. A higher DXY usually correlates with weaker commodities, weaker EM, and weaker risk assets — but only when DXY is moving for monetary reasons (Fed pivot, yields). When DXY rises on safe-haven flow, the correlation flips.
Why it matters for trading
- DXY is the de facto numeraire for global liquidity. A strong dollar drains EM funding markets, pressures commodities priced in USD, and tightens financial conditions globally.
- DXY regime tells you which playbook to use. In a "USD-strong on yields" regime, gold drops with DXY-up. In a "USD-strong on safe-haven" regime, gold rises with DXY-up. Same level of DXY, opposite trade.
- DXY *velocity* is more actionable than level. A +1% DXY move in 24h is a major macro shock; +5% in a week (rare) breaks correlations and forces unwinds.