The Wall Street Journal, which created the Dow Jones Industrial Average more than 100 years ago to measure the broad U.S. stock market, has introduced The Wall Street Journal Dollar Index to provide a more precise measure of the U.S. dollar.
“The dollar defines and determines values across the world each day, so it is crucial to divine the value of the dollar itself,” said Robert Thomson, editor-in-chief of Dow Jones & Co. and managing editor of The Journal, in a statement. “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.”
The WSJ Dollar Index is based on the latest data on total FX trading volume from the Bank for International Settlements, a supranational organization of central banks.
The index includes the seven most traded currency pairs, which each account for at least 1 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.
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