Index Investing: From Theory to Practice · Dr MAI Huu Minh, TRAN Phan Bao Ngoc & HUYNH Nguyen Quoc BuuChapter 32 of 37 · Module 7: Latest index trends and innovations
CHAPTER 32
Currency Indexes
The US Dollar Index, trade-weighted exchange rates and FX strategy indexes
Opening question
“The news says 'the dollar fell 1% today'. Fell against what? The dong barely moved, the yen jumped and the euro was flat. How can one currency have one number?”
In this chapter
- Why one exchange rate tells only half the story, and what an effective exchange rate is
- The US Dollar Index (DXY): six currencies, a geometric formula and its blind spots
- Trade-weighted indexes from the Federal Reserve and the BIS, nominal and real
- Bloomberg, ECB, CFETS, MSCI and Asian currency indexes
- Why currency indexes use geometric averages
- Investable currency indexes: forward-based returns, carry and hedged equity indexes
- The "dollar smile", the dong's managed regime and an NXW VND index
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This chapter is in the full book
Chapter 1 is free to read online. The full text of chapter 32 — with its tables, figures, worked examples and practice lab — is available in the complete edition of Index Investing: From Theory to Practice (Volume 1, NXW Investment Library).
Read Chapter 1 freeGet the full book — contact@nxw.vnSections of this chapter
32.1 Why measure a currency with an index?
32.2 The US Dollar Index (DXY)
32.3 Trade-weighted and effective exchange rate indexes
32.4 Other currency indexes
32.5 How currency indexes are calculated in practice
32.6 Investable currency indexes and strategy indexes
32.7 Using currency indexes
32.8 Asia and Vietnam
32.9 Risks and a checklist