The USD index chart is a forex chart which tracks the performance of the USD dollars against other leading global currencies in the world. It has comes in a dynamically updated composition and is represented with a diverse set of currencies which are very important from trade and liquidity perspectives. The USD index chart provides a better measure of the US dollar in comparison to other indices which do not update their composition and comprise of a handful of currencies with concentrated weights.
Annually, the USD index chart rebalances to capture the annual trading flows in comparison with the US dollars by the Federal Reserve and triennial survey of most liquid currencies from the Bank of International Settlements.
A currency index is a measure of the changes in the value of the currency by tracking the exchange rates of five of the most liquid currencies (USD,EUR,GBP,JPY and CHF). The value of the index is usually composed on an equally-weighted basket method that allocates the currency against its major counterparts over a selected period of time.
ADVANTAGES OF THE USD INDEX CHART
1. UNDERSTANDING THE STRENGTH AND WEAKNESS OF YOUR CURRENCY
The USD index chart gives the trader the rare privilege of understanding the strength and weakness of the currency since its exchange rate is plotted against 5 to 10 other major currencies in the world. The values generated from the USD index chart will show the strength or weakness of USD as currency in the market.
2. EFFICIENCY OF MONEY SAVINGS
By plotting the exchange rate of the USD against the other major currencies in the world, the efficiency of saving the money can be easily calculated by the trader. The USD index chart gives the trader the ability to know how efficient their savings will be.
3. ANALYSIS OF THE TRENDS IN THE CURRENCY MARKET
Placing the exchange rates of major currencies side by side in the USD index chart, the market trend can be studied against the other major currencies in the world. This information will come in handy when planning the trading strategy to execute or in the calculation of future forex rates. The analysis can be broken down into weekly, monthly or even yearly.
PARAMETERS CONTAINED IN THE USD INDEX CHART
The USD index charts includes the following input parameters:
• Start Date which represents the beginning date from which all calculations are to be started.
• Base Date which is a representative of the basic date which is used as equivalent for comparison. The index base value is always equal to 100%.
• Number of days is a number of days which are shown on the chart from a start date.
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