The index will track the price of the dollar against a basket of six currencies: the Australian dollar, sterling, Canadian dollar, euro, yen and Swiss franc. CME says these are its most frequently traded currency futures.
“When we launched our joint venture with Dow Jones, the goal was to leverage the collective strengths of both companies and create new index benchmarks across multiple asset classes, as well as develop customised index products,” said Scot Warren, CME Group’s managing director of equity index products.
The index is currency-weighted and inversely quoted: when the US dollar strengthens against the basket of currencies, the index goes down, and vice versa. It is calculated as the basket value divided by $10,000. The weighting will reflect economic realities as indicated by current Federal Reserve data.
Derek Sammann, CME’s managing director of FX and interest rate products, said: “This new contract provides an easier way for customers to more precisely and conveniently lay off global currency risk with a single index. Additionally, portfolio managers can dynamically hedge their positions against the index using the six most liquid currency contracts traded at CME.”