Dollar
The US dollar, the world primary reserve currency and the most traded currency in forex.
The dollar is the US currency and the most traded currency in the world.
The dollar is the US currency and the anchor of the forex market. It sits on one side of most global currency trades and is held as a reserve by central banks worldwide. Its value is driven by Federal Reserve policy, US interest rates and its status as a safe haven in stress.
How It Works
- It is on one side of most forex trades
- It is the global reserve currency
- Fed policy and US rates drive its value
Trading Tips
Watch the dollar index for a broad read
Read the dollar against the pair you trade
Expect it to strengthen in risk-off episodes
Dollar Example
Say panic hits and EUR/USD, GBP/USD and gold all fall together while only the dollar index rises. Every desk is buying the same shelter: dollars to meet margin calls. In true stress, diversification dies and the dollar is the only bid.
How Traders Use Dollar
Treat dollar direction as half of nearly every forex trade. When unsure, check DXY first: long dollars in fear, short dollars in greed, flat when the index chops.
Related Terms
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