FINANCIALS OVERVIEW

US Dollar: Contracts | Quote-board

Since end of the Bretton Woods exchange rate system in 1971, a number of economic and market events have increased interest in exchange rates both as an investment as well as hedging vehicle.

First, while the U.S. Dollar has remained the major unit of exchange in world trade, the rapid globalization of trade ahs resulted in increasing growth in corporate based foreign exchange (FX) transactions and the potential for exchange rates as a hedging vehicle.

Secondly, international global stock and bond investment has also risen dramatically resulting in an increased demand for exchange rate based produces for managing the risk of international investment portfolios.

Third, the size and liquidity of international exchange rate markets have created opportunities for pure currency investment and trading. Even with the introduction of a single European currency, which has reduced the variety of foreign exchange exposures, foreign exchange markets operate at a level of complexity which offers investment opportunities to international investors.

In short, the increased growth in international trade as well as international investment has spurred the creation of a variety of currency instruments, such as the US Dollar Index, which offer investors new currency risk management and investment opportunities. The New York Board of Trade (NYBOT) US Dollar Index (USDX; DX for short) represents the value of the US Dollar in terms of a basket of six major foreign currencies: Euro (57.6%), Japanese Yen (13.6%), UK Pound (11.9%), Canadian Dollar (9.1%), Swedish Krona (4.2 %) and Swiss Franc (3.6%). There exist a futures contract and an option contract on the DX, traded on the FINEX (a division of NYBOT). The DX provides a convenient method for direct investment in the US Dollar as well as a tool for hedging FX exposure relative to the Dollar.

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