Bloomberg US Dollar Index (BBDXY) vs U.S. Dollar Index (DXY)
In response to the evolution of the global market place, the Bloomberg US Dollar Index (BBDXY) attempts to proxy the value of the dollar against a broader basket of foreign currencies. In addition to identifying the largest trading partners of the U.S., it also conducts a screen for currencies with the greatest level of fx turnover.
Not only does this make BBDXY more diversified and dynamic, it also provides an intuitive measure of the dollar in the global marketplace. Given that the index conducts an annual screening process to determine the weights and constituent currencies, BBDXY is able to incorporate changes in the evolution of the global markets. With emerging markets now accounting for nearly 40% of global gross domestic product (GDP), it is imperative that the value of their currencies be tracked against the U.S. dollar.
Ultimately, we believe that a dynamic approach should be taken to adequately assess the value of the U.S. dollar. By focusing not only on the most liquid global currencies but also on the largest trading partners of the U.S., the Bloomberg US Dollar Index provides a broad-based and intuitive approach to valuing the U.S. dollar against a basket of foreign currencies.
Important Risks Related to this Article
Foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. Investments in currency involve additional special risks, such as credit risk and interest rate fluctuations. Diversification does not eliminate the risk of experiencing investment losses.