US Dollar (USD / DXY)

What it is

The US dollar, issued by the US Federal Reserve, is the world's dominant reserve and trading currency. The DXY (US Dollar Index) measures the dollar against a fixed basket of six currencies: the euro (57.6% weight), Japanese yen (13.6%), British pound sterling (11.9%), Canadian dollar (9.1%), Swedish krona (4.2%), and Swiss franc (3.6%). Intercontinental Exchange (ICE) maintains the index, with a base value of 100 set at its March 1973 launch. The US Federal Reserve separately publishes a Broad Dollar Index (DTWEXBGS) covering 26 trading-partner currencies, the preferred gauge for trade-weighted analysis. Key institutional actors shaping the dollar's value include the US Federal Reserve (monetary policy), the US Treasury (debt issuance and FX intervention authority), and the IMF, which tracks global reserve composition quarterly through its COFER database.

History

The dollar's reserve role crystallised at the 1944 Bretton Woods Conference, where 44 nations pegged their currencies to the dollar, which was itself fixed to gold at US$35 per ounce. US President Richard Nixon suspended gold convertibility in August 1971. Major currencies began floating in March 1973, the DXY's launch date. The index peaked at 164.72 in February 1985, prompting the Plaza Accord of September 1985: a G5 agreement to coordinate a managed dollar devaluation. The dollar's share of global foreign-exchange reserves peaked at 72% in 2001, then declined to 58% by 2024 as central banks diversified into the euro, yen, and smaller currencies. China's renminbi was admitted to the IMF Special Drawing Rights basket in October 2016 and had climbed to 8.5% of global FX trading volume by April 2025.

Current state

As of mid-2026, the dollar is in a phase of policy-driven strength. Under US Federal Reserve Chair Kevin Warsh, markets were pricing two rate hikes by March 2027 as of June 2026, sustaining upward pressure on the DXY. The IMF COFER database recorded the dollar at 58% of disclosed global reserves in 2024, a share stable since 2022. The BIS April 2025 Triennial Survey showed the dollar on one side of 89.2% of all FX trades, in a market with daily turnover of US$9.6 trillion. Foreign official and private holders owned US$9 trillion in US Treasuries as of early 2025, representing 32% of marketable supply, down from nearly 50% in 2014. Dollar-denominated stablecoins reached approximately US$220 billion in market capitalisation by April 2025, extending dollar reach into digital-asset infrastructure. The 2025 "debasement trade," a bet on dollar erosion via gold and crypto, unwound as markets repriced for Fed tightening.

Relationships

US monetary policy is the principal driver of the dollar's cyclical moves. The Warsh Fed's June 2026 hawkish turn reversed the debasement narrative that had dominated markets through 2025, and 金、銀、ビットコインが急落、「法定通貨価値毀損」トレードが巻き戻し documents gold, silver, and bitcoin falling together as the bet on dollar erosion collapsed. The yen is the most visible bilateral indicator of dollar strength: the dollar/yen rate hit 40-year highs in June 2026, documented in 円、6月東京CPI加速後も対ドル40年ぶり安値圏で推移、介入リスク高まる and extended further in 円、6月30日に1ドル162.27円まで下落、2024年の介入水準を突破, 財務相は「断固たる措置」を警告. US PCE inflation data, tracked in 米コアPCEインフレ率、5月は3.4%に上昇、2023年10月以来の最高水準、FRBの利上げ論を補強 and 米PCEインフレ率、5月は4.1%に急上昇、2023年4月以来の高水準, feeds directly into Federal Reserve rate decisions that drive the DXY. The Doha US-Iran talks introduced potential shifts in Gulf energy pricing that bear on long-run petrodollar arrangements.

What to watch

The US Federal Reserve's rate path under Warsh is the single biggest near-term variable for the DXY. Dollar-stablecoin legislation advancing in the US Congress in 2026 would formalise a legal framework for the US$220 billion stablecoin market, with structural implications for offshore dollar supply. The renminbi's rise to 8.5% of global FX turnover by April 2025 warrants monitoring for further share gains, particularly in Gulf and Asian bilateral settlements. Foreign Treasury ownership has fallen from roughly 50% to 32% of marketable supply since 2014; the pace of any further decline matters for US borrowing costs. A Gulf state shift away from dollar oil pricing would be a structural event of the first order for global dollar demand.