Trade Weighted US Dollar Index - Mathematical Formulation - Based On Nominal Exchange Rates

Based On Nominal Exchange Rates

The index is computed as the geometric mean of the bilateral exchange rates of the included currencies. The weight assigned to the value of each currency in the calculation is based on trade data, and is updated annually (the value of the index itself is updated much more frequently than the weightings). The index value at time is given by the formula:

.

where

  • and are the values of the index at times and
  • is the number of currencies in the index at time
  • and are the exchange rates of currency at times and
  • is the weight of currency at time
  • and

Read more about this topic:  Trade Weighted US Dollar Index, Mathematical Formulation

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