Why Does the Dollar Index Move Markets Worldwide?

The news often says that the dollar index is strengthening or that the dollar is weakening. But what does DXY actually measure? Why can it affect oil, gold, emerging markets and even your investments?

The dollar index is not an average against every currency

DXY, the U.S. Dollar Index, tracks only six developed-market currencies: the euro, 57.6%; the yen, 13.6%; sterling, 11.9%; the Canadian dollar, 9.1%; the Swedish krona, 4.2%; and the Swiss franc, 3.6%. The euro accounts for more than half of the basket. The index is therefore closer to a measure of the dollar's performance against European currencies than a complete picture of the dollar's overall position.

100 is the baseline

DXY's base period is 1973. An index level of 100 means the dollar has returned exactly to its original reference level. Recently DXY has been near 99.9. In other words, the dollar is close to the 100 baseline, neither particularly strong nor particularly weak.

Why does it influence the world?

Commodities are priced in dollars. Oil, gold and metals are almost all quoted in dollars, and a stronger dollar usually puts pressure on these assets.

Emerging markets carry dollar debt. When the dollar strengthens, servicing that debt becomes more expensive and capital can flow out.

It is a thermometer for Federal Reserve policy. Stronger expectations of rate increases → a stronger dollar. Stronger expectations of rate cuts → a weaker dollar. It is also used as an indicator of global risk appetite.

Three points to remember

DXY tracks only six currencies, and the euro has more than half the weight.

100 is the baseline: above 100, the dollar is stronger than in 1973; below 100, it is weaker.

It influences global markets because the dollar remains a reserve currency and the pricing currency for commodities.

Chart data are from ICE and MarketWatch, as of August 6, 2026;