The Wall Street Journal has introduced The Wall Street Journal Dollar Index (WSJ Dollar Index) to provide a more precise measure of the value of the US dollar, an essential benchmark for traders and corporate treasurers who need to discern the true measure of investing abroad or domestically.
The WSJ Dollar Index provides a measure of the value of the US dollar.
The WSJ Dollar Index was developed by the news team of DJ FX Trader, a specialized FX news service from Dow Jones, to further the service’s mission to provide authoritative, high-value and actionable information to the FX community.
The WSJ Dollar Index is based on the latest data on total FX trading volume from the Bank for International Settlements, a supranational organisation of central banks.
The index includes the seven most traded currency pairs, which each account for at least one percent of total trading volume and combined cover $2 out of every $3 traded in currency markets. The currencies are weighted based on their proportion of volume within the group of currency pairs used in the index.
The methodology and data used for the index set it apart from some existing market metrics that are based on fewer currency pairs or weight currencies equally. The WSJ Dollar Index also captures the impact of asset flows on currency volumes, which have in recent decades become a crucial part of currency movements.
Javier Paz, senior analyst for Aite Group, an independent research and advisory firm, says: “The WSJ Dollar Index methodology is centred around the right currency pairs and the right weights to capture the dollar’s strength or weakness. It is a very effective way for investors to gauge broad dollar sentiment.”
Robert Thomson, editor-in-chief of Dow Jones & Company and managing editor of The Wall Street Journal, added: “The dollar defines and determines values across the world each day, so it is crucial to divine the value of the dollar itself. No currency is an island and the dollar’s value is ultimately measured by its relationship with other key international currencies – we have blended those pairs and weighted their worth to bring a more precise measure of the dollar’s value to the forex market.”