When looking at the major currency pairs, the US Dollar (USD) is one part of each of the major pairs. When looking at any pair where the US Dollar is the base, we can see the dollar strengthening versus the quote currency as prices rise. If the price drops, the dollar is weakening versus the quote currency. When the dollar is the quote currency, the opposite is true; meaning a drop in prices would indicate the dollar strengthening.
It is easy to compare the dollar with any one currency. But how does the dollar stack up against multiple currencies? We can compare multiple charts to try and interpret the overall strength or weakness of the dollar. However, another way is to look at the US Dollar Index.
This index was created back in 1973 as a way to measure the value of the US Dollar relative to other major foreign currencies. The index compares the US Dollar with 6 major currencies with the Euro (EUR) comprising more than half of the weighting of the index. In addition to the EUR, the other currencies listed, in order of the percentage weighting, are the Japanese Yen (JPY), Great Britain Pound (GBP), Canadian Dollar (CAD), Swedish Krona (SEK), and the Swiss Franc (CHF).
When the index goes up, the dollar is overall gaining strength compared to the other currencies. Depending on where you look, the symbol for the index can vary. On http://stockcharts.com/ , the symbol is $usd. From the chart, you can see significant strengthening of the dollar since the first of July. This can be a much simpler way to get a feel for what the dollar is doing.
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