The U.S. dollar index (USDX) is a measure of the value of the U.S. dollar relative to the value of a basket of currencies of the majority of the U.S.'s most significant trading partners. This index is similar to other trade-weighted indexes, which also use the exchange rates from the same major currencies.
Currently, this index is calculated by factoring in the exchange rates of six major world currencies the euro, Japanese yen, Canadian dollar, British pound, Swedish krona and Swiss franc. The euro holds the most weight versus the dollar in the index, constituting about 58% of the weighting followed by the yen with about 14%. The index started in 1973 with a base of 100, and values since they are relative to this base.
An index value of 120 suggests that the U.S. dollar has appreciated 20% versus the basket of currencies over the time period in question. Subtracting the initial value of 100 from the current value of 120 yields 20; dividing the difference by the initial value of 100 gives an appreciation of 20%. Similarly, if the index is currently 80, falling -20 from its initial value, then the same calculation would give a depreciation of 20%. The appreciation and depreciation results are a factor of the time period in question.