The Federal Reserve's trade-weighted index of the dollar against a broad group of currencies
The dollar against 26 trading partners' currencies, weighted by trade; a dollar rising more than 5 % in a year tightens conditions for everyone who borrows in dollars.
The Federal Reserve Board publishes a daily index of the dollar against the currencies of the United States' main trading partners, weighted by their shares of US trade. Because roughly half of world trade and most cross-border bank lending are invoiced in dollars, a stronger dollar raises the local-currency cost of imports and debt service everywhere else at once. Valentina Bruno and Hyun Song Shin at the BIS showed that dollar strength contracts cross-border bank lending, and later work found the dollar to be a global risk factor: it rises when investors retreat and falls when they lend.
The rule on worldstat.us: the index more than 5 % above its level of a year earlier. That pace has coincided with the emerging-market stress of 1997 to 1998, 2014 to 2015 and 2022. The direction matters more than the level, and a strong dollar can reflect US strength rather than global stress, which is why the series sits in the Stress layer with a wide step rather than in the Cycle layer.
BIS · Federal Reserve · credit impulse