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The widely quoted dollar index is calculated against a basket of only six currencies, and the weights were fixed in the 1970s with a single adjustment when the euro replaced several European currencies. The euro makes up well over half of the basket. The yen, pound, Canadian dollar, Swedish krona and Swiss franc share the rest, with the krona and franc carrying the smallest weights.

This matters for anyone using the index as a confirming tool. A fall in the index often just means EUR/USD is rising. Moves in the Australian dollar, New Zealand dollar, Mexican peso or Chinese yuan are not captured at all, even though those currencies are significant in modern trade and flows.

A scalper trading AUD/USD or USD/MXN may find the index misleading. The basket can show broad strength while commodity currencies diverge, because the euro leg dominates the calculation. Trade-weighted indices published by central banks or broader dollar baskets provide a different picture and can disagree with the familiar index for days.

A sensible habit is to decompose any index move: check EUR/USD and USD/JPY first, since those two account for most of it. If the index and the pair being traded are saying different things, the reason is usually basket composition rather than hidden information.

Good summary. The euro weight is about 57.6 percent, so a dollar index move with flat EURUSD is rare. From Hong Kong we mostly ignore the DXY and watch USDJPY, USDCNH and AUDUSD instead, because the Asian session's dollar story is often about yen and yuan, which the index barely captures, with the yuan not in it at all.

For a broader view, the trade-weighted indices published by the Fed include many more currencies, including the yuan and peso, but they are daily and come with a delay, so they suit context rather than intraday decisions.