# The US Dollar and Stocks: How the Dollar Moves the Market

Web page: https://uptickflow.com/en/learn/us-dollar-and-stocks  
Updated: 2026-11-11

How the US dollar affects stocks: what the dollar index (DXY) measures, why a strong dollar trims multinationals’ earnings, and what it does to emerging markets.

A stronger US dollar tends to weigh on the reported earnings of US companies that sell abroad, on commodity prices and on emerging markets, while a weaker dollar tends to help them. The dollar is usually tracked with the US Dollar Index (DXY), which measures it against six major currencies, the euro above all. These are tendencies with many exceptions, because the dollar itself moves for different reasons: interest rates, growth and fear.

Below: what the DXY and the Federal Reserve’s broader index measure, how exchange rates change multinationals’ earnings, why a strong dollar is a headwind for emerging markets and commodities, what the riyal’s peg means for Saudi investors, and how traders watch the dollar. The wider picture, with bonds, gold and oil, is in [intermarket analysis](https://uptickflow.com/en/learn/intermarket-analysis). Company figures are hypothetical; this is education, not investment advice, and nothing here forecasts currencies.

## What is the US Dollar Index (DXY)?

The ICE US Dollar Index, ticker DXY, measures the dollar against a basket of six currencies with fixed weights: the euro 57.6%, the Japanese yen 13.6%, the British pound 11.9%, the Canadian dollar 9.1%, the Swedish krona 4.2% and the Swiss franc 3.6%. It started at 100 in March 1973, soon after the dollar began to float freely, so a reading above 100 means the dollar is stronger against this basket than it was then, and below 100 weaker. Its make-up has changed only once, when the euro replaced several European currencies in 1999.

Because of those weights, the DXY is mostly a measure of the dollar against the euro, and it leaves out the currencies of China and Mexico, two of the largest US trading partners. The Federal Reserve’s nominal broad dollar index fills that gap: it covers 26 currencies weighted by each economy’s share of US trade, updated every year. In the Fed’s 2019 revision, the largest 2017 weights were the euro area at 18.6%, China at 16.2% and Mexico at 13.3%. FRED publishes it as DTWEXBGS. The two indexes usually point the same way, but they can diverge when emerging-market currencies move apart from the euro and the yen.

- **US Dollar Index (DXY)**: An index from ICE that measures the US dollar against six currencies with fixed weights, the euro making up 57.6%. It began at 100 in March 1973.
- **Broad dollar index**: The Federal Reserve’s measure of the dollar against 26 currencies, weighted by their share of US trade and updated yearly. Unlike the DXY, it includes the Chinese yuan and the Mexican peso.

## How does a strong dollar affect US companies’ earnings?

Many large US companies earn a big share of their revenue abroad. Among the 261 S&P 500 companies that reported it in comparable detail, S&P Dow Jones Indices counted 43.6% of 2017 sales coming from outside the United States. Those sales are made in euros, yen and other currencies and must be translated into dollars for the company’s reports.

The drawing at the top of the page shows the effect. A hypothetical US company sells €100 million a year in Europe. At a starting rate of 1.10 dollars per euro, that is $110 million. If the dollar strengthens and the euro falls to 1.00, the same sales are reported as $100 million, 9.1% less; if the dollar weakens and the euro rises to 1.20, they are reported as $120 million, 9.1% more. Nothing changed in Europe: same customers, same euros. That is why companies often quote growth in constant currency, and why a strong dollar is a frequent explanation for weaker reported results during [earnings season](https://uptickflow.com/en/learn/earnings-season).

The effect is not the whole story. A strong dollar also makes imported parts cheaper for US firms and US exports dearer for foreign buyers, and companies hedge part of their exposure. Businesses that sell mainly at home, such as utilities and regional banks, are much less exposed; [stock market sectors](https://uptickflow.com/en/learn/stock-market-sectors) helps tell them apart.

- **Currency translation**: Converting a company’s foreign revenue and profit into its reporting currency at the period’s exchange rates. It changes the reported figures without any change in the underlying business.
- **Constant currency**: Growth measured as if exchange rates had stayed at the earlier period’s levels, to show the business trend without currency effects.

## Why does a strong dollar weigh on emerging markets and commodities?

Most commodities, including oil and gold, are priced in dollars. When the dollar rises they cost more for buyers paying in other currencies, which can dampen demand, so a strong dollar has often coincided with weaker commodity prices; see [gold trading](https://uptickflow.com/en/learn/gold-trading) and [oil prices and stocks](https://uptickflow.com/en/learn/oil-prices-and-stocks).

For emerging markets, the bigger channel is debt. About half of cross-border loans and international debt securities are in dollars, Gita Gopinath and Pierre-Olivier Gourinchas wrote on the IMF blog in October 2022, when the dollar stood at its highest level since 2000. In the drawing below, a hypothetical company abroad owes $10 million while its own currency weakens from 5 to 6 per dollar: the debt grows from 50 million to 60 million in local currency, +20%, and yearly interest at 6% grows from 3.0 million to 3.6 million, although nothing changed in the business. Research at the Bank for International Settlements (BIS) found that a stronger dollar goes with slower growth in dollar cross-border bank lending and weaker real investment in emerging economies.

The same IMF post noted that the dollar’s share of world exports has held around 40%, far above the US share of world trade, so a strong dollar also raises import prices in many countries, more so in emerging markets than in advanced economies.

- **Dollar-denominated debt**: Loans or bonds that must be repaid in US dollars. For a borrower whose income is in another currency, the debt grows in local terms when the dollar strengthens.

## What does the dollar mean for Saudi and Gulf investors?

The Saudi riyal is pegged to the US dollar at 3.75, as are most Gulf currencies. For a Saudi investor holding US stocks, the dollar’s swings against the euro or the yen do not change the riyal value of the holding; the currency cost is the margin or fee on the conversion, as [how to buy US stocks](https://uptickflow.com/en/learn/how-to-buy-us-stocks) explains. For holdings in European or Japanese stocks, by contrast, a rising dollar shrinks their value in riyals.

The peg also ties Saudi conditions to the US. Saudi interest rates tend to follow the Federal Reserve’s, so a Fed decision matters in Riyadh; see [the Federal Reserve and stocks](https://uptickflow.com/en/learn/federal-reserve-and-stocks). And oil, the kingdom’s main export, is priced in dollars, so oil revenue in riyals moves with the dollar price of oil; see [oil prices and stocks](https://uptickflow.com/en/learn/oil-prices-and-stocks).

## What moves the dollar, and how do traders watch it?

The dollar moves with interest rate gaps, growth and risk appetite. Higher US yields relative to other countries tend to draw money into dollars, and in periods of global stress investors have often bought dollars as a safe haven, which is why the dollar can rise while stocks fall. Habits many traders use:

- Chart TVC:DXY on TradingView next to SPY and an emerging-markets fund to see whether dollar moves line up with stock moves; [intermarket analysis](https://uptickflow.com/en/learn/intermarket-analysis) shows a full dashboard.
- Read the currency comments in earnings reports: companies usually say how much exchange rates added to or took from revenue.
- Remember that the DXY is mostly euro against dollar; check the Fed’s broad index when China or Mexico matter.
- Treat each link as a tendency: the dollar and stocks have moved together in some periods and in opposite directions in others.
- To trade currency pairs directly, start with [forex trading for beginners](https://uptickflow.com/en/learn/forex-trading-for-beginners).

## Key takeaways

- The DXY measures the dollar against six currencies with fixed weights, 57.6% of it the euro; the Fed’s broad index covers 26 currencies weighted by trade.
- A stronger dollar shrinks the dollar value of foreign sales: €100 million is $110 million at 1.10 but $100 million at 1.00.
- A strong dollar tends to weigh on commodities and on emerging markets with dollar debt.
- The riyal is pegged at 3.75, so dollar swings do not change the riyal value of US holdings, but they do change holdings in other currencies.

## FAQ

**Is a strong dollar good or bad for US stocks?**

It depends on the company and on why the dollar is rising. A strong dollar trims the reported foreign earnings of multinationals and tends to weigh on commodity producers, while companies that import or sell mainly at home are less affected. If the dollar is rising on global fear, stocks may be falling for the same reason.

**What does a DXY reading of 100 mean?**

That the dollar is at the same level against the six-currency basket as when the index started in March 1973. Above 100 means stronger than then, below 100 weaker.

**Why do commodities often fall when the dollar rises?**

Most commodities are priced in dollars, so a stronger dollar makes them more expensive in other currencies, which can reduce demand. It is a tendency, not a rule: a supply shock or strong demand can push both up together.

**Does the dollar matter if I invest from Saudi Arabia?**

For US stocks the peg removes most currency risk, since the riyal is fixed at 3.75 per dollar. The dollar still matters indirectly, through oil prices, Saudi interest rates that track the Fed, and the riyal value of any holdings in euros, yen or other currencies.

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Educational content, not financial advice. Trading involves risk of loss. https://uptickflow.com/llms.txt