The US dollar is the currency of the world’s largest national economy. The USD is the world’s reserve currency, meaning many other national central banks hold deposits of the US dollar on their balance sheets, and many multi-national corporations base their operations or, at the least, retain considerable operations in the US dollar given the importance to trade.
The US dollar does not actually trade on the spot FX market on its own. There is a futures contract, traded under ticker symbol of ‘DXY’ that will track the performance of the US dollar, but, even then, its more of an estimation than anything. As we touched on in our FX primer article, because currencies are the base of the financial system, there’s no other way to value a currency than by using another currency. And this complicates valuation of the US dollar because there’s not just one other single currency to compare it to. Perhaps bitcoin or gold should be considered as a yard stick, instead. The latter suffers from its own demand and supply constraints while the former is relatively young in the grand scheme of things, making such a prognostication a bit presumptuous.
Nonetheless, the US dollar remains a favored vehicle for traders. There’s considerable attention paid to the representative central bank, who do not appear bashful about using the currency to accomplish their aims, which can lead to prolonged trends of weakness and possibly even strength, as any tightening action is often well foreshadowed.
US dollar Content
- NFP: Not F*cking Playing
- The Forex Forecast
- USD Bullish Trend Targets 93 DXY
- EUR/USD support test
- USD Begins Reversal