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Saturday, May 7, 2011

USA Dollar Index(USDX)

USDX measures the strength of US Dollar against a basket of Currencies: Euro, Japanese Yen, Pound Sterling, Canadian Dollar, Swedish Krona and Swiss Frank.
Diagram showing assigned weightage of basket currencies:



USDX carries the inverse relationship with capital markets of emerging markets, i.e. rise in USDX is unfavourable for capital markets of emerging markets (EM).
When UDX ascends, dollar carry trades start facing losses so carry traders wind up their trades, which results in descending capital markets..

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