Monday, May 27, 2024
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Stronger US Currency Compared to its peers? An Issue with Currencies

It’s critical to establish the background information on the subject, the US dollar, and historical references before we can properly assess the title. The Bretton Woods Conference in 1944, following World War II, solidified the US dollar’s position as a reserve currency. Ever since, the US dollar has benefited from its status as the global reserve currency. Not only that, but the majority of currency pairs in the forex market, which deals in foreign exchange, are aligned with the US dollar relative to the other currency.

Then, shortly after the Bretton Woods system was dismantled in 1973, the US dollar index—also known as USDX or DXY—was created. It serves as a relative indicator of the strength of the US dollar relative to a basket of six major currencies, including the euro, pound, yen, Canadian dollar, Swedish kroner, and Swiss franc, with a starting point of 100. Even now, this index is still very helpful. ICE (Intercontinental Exchange, Inc.) created, manages, and publishes the index; the term “US dollar index” is a registered trademark.

According to index fluctuations, the US dollar index has been fluctuating across a rather large range since it began trading at 100 in 1973. The dollar index, which is based on historical movements, went from an all-time high of 164.72 in February 1985 to an all-time low of 70.70 in March 2008. The dollar index has risen from these lows, reaching a high of 114.78 on September 26, 2022, and a lower low of 89.21 on April 1, 2021. As of April 26, 2024, the markets are closed, and it is currently trading at 106.09.

Is the dollar index rising and showing strength? The response is undoubtedly negative given the movements of the two major components of the dollar index, the euro and the Japanese yen, which covers over 70 percent of the dollar index weight.

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Monday, May 27, 2024

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