CME Group and Dow Jones Indexes announced Tuesday the launch of a new index called the Dow Jones CME FX$INDEX, which they say will give futures brokers and traders a more efficient way to trade global currencies against the U.S. dollar.
The index represents the value of the dollar as compared to a basket of six other international currencies: the Australian dollar, the Canadian dollar, the Euro, the British pound, the Japanese yen, and the Swiss Franc.
“This new currency index leverages Dow Jones Indexes’ capabilities and CME Group’s distribution experience and leading role in currency futures,” said Michael A. Petronella of Dow Jones Indexes.
Derek Sammann, CME Group’s Managing Director of FX and Interest Rates Products, said “market participants have long shown an interest in trading a basket of currencies against the U.S. dollar as a means of managing their risk.”
The new index essentially allows futures traders to short the dollar and hedge their global risk with a single contract. It is inversely weighted, meaning that when the dollar strengthens against the currencies in the basket, the index decreases, and vice-versa.
It is also incredibly liquid, since the six currencies in the basket and the U.S. dollar are by far the most-traded in global markets each day.
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