A Currency Strength Index (CSI) measures how a single currency performs against a basket of other currencies simultaneously. Unlike a traditional exchange rate that compares two currencies (e.g., EUR/USD), the strength index gives you a panoramic view of a currency's overall performance.
Why exchange rates are incomplete
When you check EUR/USD, you learn one thing: how the Euro performs against the Dollar. But what about the Euro against the Pound, the Franc, the Yen, or the Krona?
A currency can be rising against one peer while falling against another. This makes individual exchange rates unreliable for answering the question: "Is this currency actually strong or weak?"
Example: In Q3 2022, the Euro dropped below parity with the US Dollar for the first time in 20 years. Headlines screamed about the Euro's collapse. But the Currency Strength Index told a different story — the Euro was actually holding steady against most other currencies. It was the Dollar that was exceptionally strong, not the Euro that was exceptionally weak.
How the Currency Strength Index works
The FX Compass Currency Strength Index follows these steps:
1. Collect exchange rates
Every trading day, we collect official exchange rates from the European Central Bank (ECB) for 14 major currencies, plus UAH rates from the National Bank of Poland (NBP). This gives us data for 15 currencies:
EUR, USD, GBP, CHF, JPY, CAD, AUD, NZD, SEK, NOK, DKK, PLN, CZK, HUF, UAH
2. Calculate cross-rates
From these base rates, we compute all possible cross-rate pairs. With 15 currencies, that's 105 unique pairs (15 choose 2).
3. Compute daily changes
For each pair, we calculate the daily percentage change. For example, if EUR/GBP moved from 0.8500 to 0.8550, that's a +0.59% change for EUR against GBP.
4. Average across the basket
For each currency, we average its performance against all other 14 currencies. This gives a single daily change number that represents the currency's broad-based performance.
5. Build a cumulative index
Starting from a base value of 100, we compound the daily changes to build a cumulative index. If the Euro gains 0.3% on average against the basket on day 1, its index moves from 100 to 100.3. If it gains another 0.2% on day 2, it moves to 100.5, and so on.
6. Rebase for the selected period
When you select a time range on the FX Compass chart, all currencies are rebased to start at 100 at the beginning of that period. This makes it easy to compare performance from any starting point.
How to read the chart
- A line going up means the currency is strengthening against the basket
- A line going down means the currency is weakening against the basket
- A value of 105 means the currency has gained approximately 5% against the average of all other currencies since the start of the selected period
- The gap between two lines shows their relative performance — a wider gap means a bigger divergence
Try it yourself: open the FX Compass dashboard, select a few currencies, and change the time range. You'll immediately see patterns that no single exchange rate could show you.
What the index is NOT
The Currency Strength Index is a powerful tool, but it's important to understand its limitations:
- It's not a trading signal. The index shows trends and relative performance. It does not predict future movements.
- It's not trade-weighted. Unlike some central bank indices, our CSI gives equal weight to all currencies in the basket. This means a move against the Japanese Yen counts the same as a move against the Danish Krone, regardless of trade volumes.
- It's not real-time. Data is sourced from official daily fixings (ECB and NBP), so the index updates once per trading day.
Data sources
| Source | Currencies | Update frequency |
|---|---|---|
| European Central Bank (ECB) | 14 currencies vs EUR | Daily (around 16:00 CET) |
| National Bank of Poland (NBP) | UAH/PLN | Daily |
The ECB and NBP are official institutions whose data is widely used by banks, governments, and financial institutions worldwide.
Common use cases
For travelers
Check if your home currency is broadly strong or weak before booking international travel. A strong currency means your money goes further everywhere, not just in one destination.
For remote workers and freelancers
If you earn in one currency and spend in another, the strength index shows whether your real income is rising or falling — even when your contract amount stays the same.
For investors
Understanding broad currency trends helps with international investment decisions. A weakening home currency increases returns from foreign investments (and vice versa).
For curious minds
Sometimes the most interesting insights come from unexpected patterns. Why did the Norwegian Krone surge last quarter? Why is the Hungarian Forint consistently weak? The strength index reveals stories that exchange rates hide.
Frequently asked questions
How often is the data updated?
Daily. The ECB publishes rates around 16:00 CET on every trading day. Our index updates shortly after.
Can I see historical data?
Yes. FX Compass provides data going back several years. Use the time range selector to explore different periods.
Why 15 currencies?
These are the currencies for which the ECB and NBP provide reliable daily exchange rate data. They cover the major economies and include a good mix of developed and emerging market currencies.
Is this the same as the Dollar Index (DXY)?
No. The DXY measures the US Dollar against a fixed, trade-weighted basket of 6 currencies. Our CSI measures each currency against all others with equal weighting. This gives a more balanced view, especially for non-USD currencies.