Comment as of Thursday, October 16, 2025

The Dollar Index (DX), a multi-currency index that excludes the Chinese Yuan from its composition, has been in a broad, sideways pattern for the last 18 weeks. The potential for lower interest rates is a factor in Dollar weakness and the U.S. Federal Reserve seems inclined to allow the rates to slip lower. The Index does not include the Russian Ruble or the Chinese Yuan (Reminbi) among its components for calculation (see charts below). At present the Ruble is weakening against the Yuan and slightly against the Dollar, although the values are apparently considered to be in the “Management Targets”, set by Russia and China. For wheat prices from Russia, a weaker Ruble makes international prices for Russian wheat less expensive.

On June 12-13, the Russian government forced the U.S. Dollar off of Russia’s large central trading exchange (MOEX), as the Yuan is now designated as the Central Bank of Russia’s “Benchmark” currency. Now anyone in Russia or dealing with Russia who wishes to use the USD for trade must use interbank markets instead of open exchange trades on the MOEX to price Rubles or Dollars, making it significantly more expensive and less transparent. The direct effect on the Dollar Index is not large.

The new sanctions will also put pressure on others who trade with Russia, as there are terms that threaten to isolate entities that interact with Russian buyers of technology and other war-supportive goods. The downstream effects will emerge in the next few weeks and months.

The next technically definable upside target, at 108.81 on the Index is a retracement ratio of 61% of the entire move down from the September 2022 highs. A central factor is the rise in interest rates, ultimately a wheat price negative for U.S. origins, as it makes purchases more expensive through the foreign currency translation to U.S. dollars needed to complete transactions. The trend on a break above the 108.8 level will be confirmed as higher.

*A “Real Interest Rate” equals the observed market interest rate adjusted for the effects of inflation. The nominal US Real Interest Rate is at -1.19%, compared to +2.21% last year. The Current rate of inflation is higher than the yield of short-term treasury paper. The effect is to make the U.S. dollar and/or government notes and bonds less attractive in global markets versus any other currency or paper of nations whose real interest rates are positive.

The U.S. Dollar Index is heavily weighted toward European currencies. The Chinese Yuan should be followed alongside the Dollar Index for a more complete assessment of Dollar value in the world. (see below)