Dollar index eases from 18-month high as oil and Fed bets cool in Asia

The US dollar gave back some ground in Asian trade on Tuesday after Monday's strong rally. FXStreet reports that the US Dollar Index slipped below 102.50, after touching its highest level since April 2025 the day before.

Monday's gains came as oil climbed. investingLive reports that EUR/USD hit a 2026 low on the day, and FXStreet notes that rising oil prices are fuelling inflation worries and bets on further Federal Reserve rate hikes. On Tuesday, FXStreet says EUR/USD recovered to near 1.1165, with US inflation reports due later this week. Our sister site has a fuller rundown of the dollar's slip from its 18-month high in Asia.

What is the US Dollar Index?

A single exchange rate only tells you how the dollar is doing against one currency. EUR/USD might fall because the dollar is strong, or because the euro is weak. You cannot tell from one pair alone.

The US Dollar Index, often shown by its ticker DXY, solves this. FXStreet describes it as a measure that tracks the greenback (a nickname for the dollar) against a basket of currencies. When the index rises, the dollar is gaining against the basket on average. When it falls, the dollar is losing ground on average.

Think of it as a report card for the dollar. One subject can go badly while the overall grade still rises. You can follow it on a DXY chart.

A worked example

The real index uses a fixed formula and fixed weights. To show the idea, we build a simple, equal-weight version from the official ECB reference rates (fixings) of 12 October, compared with the 9 October fixings. These are once-a-day reference rates, not live quotes.

First, the change in EUR/USD:

(1.1181 - 1.1206) / 1.1206 = -0.0025 / 1.1206 = about -0.22%

EUR/USD fell, so it took fewer dollars to buy a euro. That means the dollar rose by roughly 0.22% against the euro. For pairs where the dollar is quoted second, we flip the sign. For pairs where the dollar comes first, a rise is a dollar gain.

Add the dollar changes: 0.22 + 0.22 + 0.21 + 0.25 - 0.11 + 0.10 = 0.89.

Divide by six pairs: 0.89 / 6 = about +0.15%.

So our simple basket shows the dollar up about 0.15% on the day. Note the pound: the dollar actually lost against sterling. FXStreet links the pound's firmness to UK retail sales data. The index still rose because the dollar gained against most of the other currencies.

The flip-the-sign step is an approximation. It works well for small daily moves like these.

Why it matters for new traders

• It separates dollar moves from local news. If the index is up and EUR/USD is down, the dollar is likely the driver. If EUR/USD falls while the index is flat, look for euro-specific news, such as the French fiscal worries FXStreet mentions.
• It gives context for big headlines. A "18-month high" for the index tells you the dollar is broadly strong, not just against one rival.
• It reminds you that weights matter. A real index gives some currencies more influence than others, so it will not match a simple average exactly.

With US inflation data due this week, the index is one quick way to see whether any reaction is a broad dollar story. Compare it with a EUR/USD chart to see how the two line up.

Key terms

• US Dollar Index (DXY): a single number tracking the dollar against a basket of currencies.
• Basket: the group of currencies an index measures against.
• Greenback: a common nickname for the US dollar.
• Fixing (reference rate): an official once-a-day exchange rate, such as the ECB's, not a live trading price.
• Weight: how much influence one currency has on the index's value.