U.S Dollar Index

The US Dollar Index measures the performance of the American currency against a basket of foreign monies.

Currently, it compares the greenback - as the dollar is often known - to the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc.

Several European monies were replaced in the index by the euro in 1999 and as a result the single currency holds a much stronger weighting than the others.

While the euro accounts for over 58 per cent of the figure, the yen, pound, dollar, krona and franc represent 12.6 per cent, 11.9 per cent, 9.1 per cent, 4.2 per cent and 3.6 per cent respectively.

The US Dollar Index, which tends to be shortened to USDX, started out at 100 points in 1973 and has since fluctuated as high as 148.1244 in 1985 and as low as 70.698 in 2008.

In order to calculate the figure, analysts produce a geometric mean of the dollar's value versus the six currencies, taking into account their weighting.

If the number goes up, this is treated as the currency gaining strength against the basket of monies.

Since the low point of 2008, the USDX has had significant ups and downs, with peaks in late 2008, early 2009 and mid 2010.

However, its performance from then onwards has reflected the declining fortunes of the dollar, with a brief recovery towards the end of 2010 and at the beginning of 2011 leading to near all-time lows in late April and early May of the year.

The USDX is updated alongside the greenback and shares the same trading hours as the currency: from Sunday evening New York time for 24 hours each day until late Friday afternoon.

This is because traders in regions with significant time differences such as Asia also deal with the money.

Because of the heavy weighting of the euro, any change to the single currency can have a significant effect on the index.