Currency Basket¶
A currency basket is a weighted portfolio of foreign currencies used to measure the value of a base currency or to execute a diversified currency trade in a single transaction. Central banks, index providers, and institutional traders assign weights to each component currency based on trade flows, reserve holdings, or investment objectives. The most widely followed example is the U.S. Dollar Index (DXY), which measures the dollar against six major currencies using a geometric weighted average.
HOW IT WORKS¶
Each currency in the basket carries a weight that determines its contribution to the overall value. The DXY, for instance, weights the euro at 57.6%, the Japanese yen at 13.6%, the British pound at 11.9%, the Canadian dollar at 9.1%, the Swedish krona at 4.2%, and the Swiss franc at 3.6%. The index is calculated as a geometric weighted average anchored to a base value of 100.00 set in 1973, so a reading of 104.82 means the dollar has appreciated roughly 4.82% against the basket since that base period. Custom baskets follow the same principle: weights are assigned proportionally, meaning a 57.6% EUR weight translates to 57.6% of notional exposure in euros, not 57.6% of capital allocated. Traders construct custom baskets when a standard index like DXY does not reflect their specific view — for example, to overweight EUR and JPY while excluding currencies the index omits, such as the Chinese yuan or Mexican peso.
IN TAPEBOARD¶
The Tapeboard terminal displays the DXY as a sentiment overlay on any USD pair, letting you read aggregate dollar strength alongside the individual pair's price action. You can build a custom currency basket directly in the terminal by specifying component currencies and target weights; Tapeboard calculates the required notional per leg and routes the orders proportionally. The basket view consolidates mark-to-market P&L across all legs into a single net figure, so you track hedged exposure without switching between individual positions. Use the basket hedge tool to match a multi-currency revenue profile — for example, weighted EUR, GBP, and JPY forwards — and Tapeboard will flag weight drift as exchange rates move so you can rebalance.