A currency index compresses a lot of exchange rates into one number. Which number you get depends on which currencies went into the basket and how much each one counts. Three widely used methods give three different answers about the same dollar on the same day, and none of them is wrong.
The 1973 basket: DXY
The ICE U.S. Dollar Index, ticker DXY, is what most "dollar strength" headlines are quoting. It holds six currencies:
| Currency | Weight |
|---|---|
| Euro | 57.6% |
| Japanese yen | 13.6% |
| British pound | 11.9% |
| Canadian dollar | 9.1% |
| Swedish krona | 4.2% |
| Swiss franc | 3.6% |
Four of the six are European, and the euro on its own is more than half the index. That weight is an accident of history: when the euro launched in 1999 it inherited the combined weights of the German mark, the French franc and the other legacy currencies it replaced. The basket has not been reweighted since.
So DXY behaves a lot like EUR/USD with some noise attached. Over the past 12 months the euro is down 2.3% against the dollar, and an index built 57.6% out of the euro will read that as dollar strength almost by construction.
The trade-weighted basket: the Fed and the BIS
The Federal Reserve publishes a broad dollar index covering 26 currencies, each weighted by that partner's share of US goods and services trade. The weights are recalculated annually. Under the set that took effect on 2 February 2026:
| Partner | Weight |
|---|---|
| Euro area | 21.0% |
| Mexico | 14.8% |
| Canada | 12.8% |
| China | 10.9% |
| United Kingdom | 5.2% |
| Japan | 5.2% |
Mexico alone outweighs Japan and the UK put together. Neither the peso nor the renminbi appears in DXY, and here they are more than a quarter of the basket between them. Sweden, worth 4.2% of DXY, is worth 0.6% to the Fed. Russia is 0.087%.
The BIS runs the same idea for everyone else: nominal effective exchange rates for 64 economies, calculated as geometric trade-weighted averages of bilateral rates, with weights rebuilt every three years. Its real effective rate series then adjusts those for relative consumer prices.
Trade weighting answers one specific question well. If you import, export or budget in a second currency, you want to know what happened to the price of the things you actually buy and sell, and a basket weighted by trade flows tells you that.
The equal-weighted basket
The third method throws out trade flows and asks something simpler: how is this currency doing against its peers, if every peer counts the same?
That is what the FX Compass index measures. It takes 16 currencies, computes every cross rate between them, and averages each currency's daily move against the other 15. Nothing is privileged, and every currency gets an index of its own rather than the dollar getting one and everyone else getting a footnote.
On that basis the dollar is down 0.7% over 12 months and sits 8th of 16, dead centre. The Hungarian forint leads at +9.3%, the Australian dollar is second at +8.3%, and the yen is last at −7.5%.
Same dollar, same day, two verdicts. DXY reads strong because the euro is weak. The equal-weighted index reads average, because most of the currencies beating the dollar this year are ones DXY does not contain.
Why "euro index" and "pound index" are hard to find
Search for a euro index or a pound index and the results thin out fast. There is no exchange-traded equivalent of DXY for most currencies, so what you find is either an academic trade-weighted series from a central bank, updated monthly and quoted in index points nobody recognises, or a broker's chart of that currency against the dollar, which is a pair and not an index at all.
This is a side effect of how DXY was built. It measures one currency against a fixed list, so the list has to be rewritten from scratch for every currency you want to cover. A cross-rate method has no such problem: compute the whole matrix once and every currency in it has an index. That is why the dashboard can show a euro, pound, Canadian dollar or New Zealand dollar index on the same footing as the dollar.
Which one answers your question
Reaching for DXY out of habit is the usual mistake, because it is the one with a ticker. Match the method to what you are actually asking:
If you are trading EUR/USD or reading a market comment about the dollar, DXY is the right reference, since it is what everyone else is quoting and it is largely the same trade.
If you run a business with foreign suppliers or customers, use a trade-weighted index, ideally one weighted to your own trade rather than the average American's. The Fed and BIS series are the closest public approximations.
If you want to know whether a currency is genuinely gaining or losing ground against its peers, or you are comparing several currencies at once, an equal-weighted basket is the cleaner instrument. It is also the only one of the three that does not need rebuilding when you switch which currency you care about.
What each method gets wrong
DXY is stuck in 1973. Mexico and China are two of the three largest US trading partners and neither is in it.
Trade weighting is backward-looking by design. The Fed's 2026 weights come from past trade data, and the BIS recalculates only every three years, so a fast shift in trade patterns takes a while to show up.
Equal weighting has its own blind spot, and it is worth naming. Treating every currency the same means a currency pegged to another one still gets a full vote. The Danish krone tracks the euro closely, and the index shows it: DKK is at −1.4% against the basket while EUR is at −1.2%, a gap of 0.2 percentage points over a full year. In practice that gives the euro bloc close to a double share of the basket. The forint and the koruna float independently, but they are pulled by the same European rate cycle, which nudges things the same way.
No basket is neutral. Choosing one is choosing what to compare against, and that choice sets the answer before any data arrives.
Check it yourself
The index updates every trading day. The worldwide dashboard shows all 16 currencies on one chart, each currency page carries its 1-month, 12-month, 3-year and inflation-adjusted figures, and you can build a custom basket if you want the comparison narrowed to a specific set.
Related reading: How strong is the US dollar right now?, Is the euro getting weaker?, What is a currency strength meter?, and the full 2026 strength ranking.
This article is informational, not investment advice.