It was established shortly after the Bretton Woods Agreement collapsed, with the goal of tracking the dollar's performance in relation to the currencies of the major US trading partners. It has been tradable as a futures contract since the 1980s, and speculators have used it to speculate on the movement of the US Dollar against a basket of other major currencies.

The U.S. Dollar Index (USDX) was created in 1973 to provide a measure of the value of the U.S. dollar relative to a basket of major world currencies. The inception of the index coincided with the collapse of the Bretton Woods system, which pegged many currencies to the U.S. dollar. As the world transitioned to a system of floating exchange rates, the USDX became a crucial tool for assessing the dollar's overall strength or weakness.

The index is composed of a basket of six major currencies, with the euro having the most significant weight, followed by the Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc. Traders, investors, and policymakers use the U.S. Dollar Index to monitor and analyze trends in the dollar's value, aiding in decision-making processes related to international trade, monetary policy, and investment strategies.