The Trade-Weighted Dollar Index (TWDI)

Another type of US dollar index exists.

The Federal Reserve invented it, and it's now often used by glamorous people like economists and currency examiners.

The “Trade Weighted US Dollar Index” is what it's named.

Here is a link to the Federal Reserve Economic Data (FRED) website where you can find it.

Their website is undoubtedly one of the most gorgeous ever created.

Just joking. It's a website run by the government.

Beautiful？ It's like putting lipstick on a pig.

Useful？ Yes, definitely.

The wide index, also known as trade-weighted US dollar index, is an evaluation of the worth of the US dollar in relation to several foreign currencies.

It's a trade-weighted index that aims to outperform the ICE U.S. Dollar Index (USDX) by incorporating more currencies and changing the weights on annual basis.

The Fed sought to create an index that would more correctly reflect the dollar's value against other currencies based on how competitive American goods are in comparison to goods from other countries.

It was founded in 1998 to stay up with trade in the United States.

The Trade-Weighted US Dollar Index is a measure of the worth of the dollar relative to other currencies.

“Weighted averages of the foreign exchange value of the US dollar against the currencies of a broad set of important trading partners,” according to the Federal Reserve Bank of St. Louis.

The current weighting (in percentage) of the index is as follows, from strongest to weakest:

*Weights as of December 16, 2019

The basket of currencies used and their proportional weights are the key differences between the USDX and the trade-weighted US dollar index.

Countries from all across the world, including several developing countries, are included in the trade-weighted index.

Given the condition of global trade, this index may be expected to provide a more accurate picture of the US dollar's worth around the world.

The weights are based on trade data from last year.