Dow Jones Indexes, a leading global index provider; and FXCM Inc., a global online provider of foreign exchange trading and related services; today announced they have collaborated to launch the Dow Jones FXCM Dollar Index.
The new index reflects the change in the value of the U.S. dollar – the world’s primary currency and a major economic indicator for traders, investors, financial institutions, corporations and governments – against a weighted basket of four of the most liquid currencies in the world: the Euro, British pound, Japanese yen and Australian dollar.
This four-currency combination accounts for more than 80% of worldwide spot market activity within the foreign-exchange marketplace, which itself is the largest marketplace in the world with $4 trillion a day in notional trading activity in 2010. This currency combination also provides a balance of geographic and geopolitical exposure to European and Asian economies from a currency perspective.
The Dow Jones FXCM Dollar Index employs a methodology that utilizes FX quantities as the basis of its calculation, rather than FX spot rates, in an effort to ensure a clear and transparent index. Further, this approach seeks to replicate real-world FX portfolio construction, allowing the index to serve as the basis for a wide range of instruments such as ETFs, mutual funds, forwards, futures, swaps, options, and structured products.
“The Dow Jones FXCM Dollar Index is an effective, straightforward and easily replicable measure of the value of the U.S. dollar compared to a diversified global basket of the world’s most liquid currencies,” said Michael A. Petronella, President, Dow Jones Indexes. “It provides investors with a unique tool for following real-time changes in the relative value of the world’s most economically significant currency. And, the index benefits from the knowledge, infrastructure and distribution network of two industry leaders: Dow Jones Indexes and FXCM.”
For Dow Jones Indexes, the announcement of the FXCM collaboration represents the second new co-branded indexing effort within the past week: on April 26, Dow Jones Indexes announced an agreement to develop an index family utilizing a proprietary strategy created by LSP Partners, a risk management research consulting firm.
