Which Currencies Are Part of the Bloomberg Dollar Spot Index?  

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Which Currencies Are Part of the Bloomberg Dollar Spot Index?

Here is the most recent composition of the Bloomberg Dollar Spot Index compared to the previous year.

2020 Bloomberg Dollar Spot Index Composition

How the Bloomberg Dollar Spot Index Determines Which Currencies to Include

The index rebalances once a year to incorporate new data from:

  • The annual survey of major trading partners versus the U.S. dollar as reported by the Federal Reserve.
  • The triennial survey of most liquid currencies as reported by the Bank of International Settlements (BIS).

Currencies pegged to the U.S. dollar are excluded and currencies heavily managed (like the Chinese renminbi) have their exposure capped.

To ensure tradability, currencies with weights of less than 2% are removed.

At each annual rebalance, the following steps are taken to select which currencies to include and their weights:

  1. Identify the top 20 currencies in terms of trading activity versus the underlying currency. For the U.S. dollar, this is as defined by the Federal Reserve in its Broad Index of the Foreign Exchange Value of the Dollar.
  2. Identify the top 20 currencies from the Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity. Specific information about foreign exchange turnover can be found here.
  3. Select the top 10 currencies of both lists, but exclude any pegged currencies. For example, currencies pegged to the U.S. dollar (such as the Hong Kong dollar or Saudi riyal) are removed for the Bloomberg Dollar Spot Index.
  4. Assign a preliminary weight for each currency based on its trade weight and liquidity weight. 
  5. Cap the exposure of Chinese renminbi and remove smaller currency positions, defined as any position that has a weight of less than 2%.
  6. Voila! BBDXY calculation complete!

The rebalanced target weights are applied after the close of the last U.S trading day in December every year.

Here’s a chart that visualizes the above process:

How to Computer BBDXY

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