The U.S. Dollar Index (USDX) is a number that measures a “teeter-totter” relationship between the U.S. fiat dollar (on one end of the “teeter-totter”) and six foreign, fiat currencies (sitting on the other end of the “teeter-totter”). That relationship measures the relative inflation/deflation between the U.S. dollar and the other six currencies.
The six foreign currencies and their relative “weights” in the USDX are:
Euro (EUR), 57.6% weight
Japanese yen (JPY) 13.6% weight
English pound sterling (GBP), 11.9% weight
Canadian dollar (CAD), 9.1% weight
Swedish krona (SEK), 4.2% weight
Swiss franc (CHF) 3.6% weight
First, note that the most heavily-weighted foreign currency is the euro which makes up almost 58% of the total “weight” of the six foreign currencies in the USDX. Changes in the perceived purchasing power of the euro can have a significant effect on the USDX. Changes in the purchasing power of the Swiss franc (just 3.6% of the total weight of the six foreign currencies) will have only a negligible effect on the USDX.