The U.S. dollar index measures the value of U.S. dollars in
comparison to six other major currencies-euro, yen, British pound
sterling, Canadian dollar, Swedish krona, and Swiss franc. In forex
trading, this is measured by the weighted geometric mean of the U.S.
dollar against the six global currencies. The index is updated twenty
four hours a day, seven days a week. The U.S. dollar index serves as
the general assessment of the value of the U.S. dollar.
The U.S.
dollar index was invented back in March 1973 to replace the Bretton
Woods system. That period was chosen as the zero point because it was
significant in the history of forex options trading market. This
implies that during the time most currency trading nations were quoted
freely against one another. It was agreed upon in the Smithsonian
Institution, Washington and was considered by market theorists as a
victory against the Bretton Woods system that promotes the collapsed
fixed rate invented 25 years ago.
The U.S. dollar index is now
used as an indicator in forex trading by most speculators who uses
currency pairs that involves the U.S. dollar. Besides, the forex market
is all about the highs and lows of the U.S. dollars. Taking into
account the value of the American greenback by using U.S. dollar index
is a good signal to the trader as to when to enter a trade. This shall
be an addition to the growing knowledge of traders when it comes to the
ins and outs of the financial market.
Timothy Stevens is a Forex Options Trader who owns http://www.NonDirectionTrading.com - He has helped hundreds of people on Trading Forex with Options.
He
has recently developed a free e-course showing you a step by step
process for starting your Forex Trading easier. To learn how to start
Forex Trading with Options without wasting your time and losing more
money, visit http://www.NonDirectionTrading.com/members/FreeReport.htm
