CME Group and Dow Jones Indexes have created a new currency index and corresponding futures contract.

Launched July 26th, Dow Jones CME FX$INDEX futures offer targeted risk management against a basket of major world currencies, all in a single contract. The contract focuses on the most frequently traded CME FX futures: the Euro FX.

As announced by the CME Group, the contract is based on a new, inversely quoted, currency-weighted index and is designed for efficient hedging against a basket of the most frequently traded CME FX futures: the Euro FX, Japanese yen, British pound, Swiss franc, Canadian dollar and Australian dollar contracts, all traded against the U.S. dollar. The basket is weighted to reflect world trade but also refined to allow more precise hedging.

The index is quoted in U.S. dollars per foreign currency unit, in an inverse relationship. When the U.S. dollar strengthens against the basket of currencies, the Dow Jones CME FX$INDEX goes down, reflecting the relatively lower values of the currencies in the basket. When the dollar weakens against the basket of currencies, the Dow Jones CME FX$INDEX goes up, reflecting the higher values of the currency basket.

Specifically, 10 Dow Jones CME FX$INDEX futures reflect a basket of the following numbers of contracts:

4 EuroFX

2 Japanese yen

2 British pound

1 Swiss franc

1 Canadian dollar

1 Australian dollar