Atlanta Fed Revises Dollar Index to Include European Monetary Union and Other Countries

For immediate release Feb. 4, 1999

The Federal Reserve Bank of Atlanta announced today the revision of its monthly trade-weighted dollar index to include the newly introduced euro, the currency of the European Monetary Union (EMU), as well as currencies in several Latin American countries and Malaysia. The first release of the revised dollar index is Monday, Feb. 8.

Two key areas that have been revised are the trade weights used to calculate the index and the countries included in the index. The original Atlanta Fed dollar index used trade weights from 1984. In order to update the dollar index to reflect more current trading patterns, the revised dollar index will be calculated using average weights from 1995-97.

In addition, to accurately reflect the scope of the euro, five countries included in the first wave of the EMU are being added to the revised index. These countries include Austria, Finland, Ireland, Luxembourg and Portugal. Brazil, Malaysia and Mexico are also added to the revised dollar index, while Sweden is deleted. With these changes, the revised dollar index now includes the United States' top 15 trading partners.

In order to maintain as much continuity as possible with the Atlanta Fed's previous dollar index, the subindexes of the revised dollar index remain largely the same. In the revised dollar index, however, the Canadian subindex is renamed the Americas subindex to reflect the addition of Brazil and Mexico.

The other subindexes are the European, the Pacific, the Pacific-excluding-Japan and the classic. The European subindex includes the EMU, Switzerland and the United Kingdom. The Pacific subindex includes Australia, China, Hong Kong, Japan, Korea, Malaysia, Singapore and Taiwan. The Pacific-excluding-Japan subindex includes the countries in the Pacific subindex minus Japan.

To maintain continuity with the original dollar index, a new subindex, called the classic, is included in the revised dollar index. The classic subindex includes all of the countries in the original dollar index with the exception of Sweden and contains data back to 1973. The countries in the classic subindex are Australia, Canada, China, Korea, Japan, Hong Kong, Switzerland, Saudi Arabia, Singapore, Taiwan, the United Kingdom and the EMU.

The methodology for calculating the dollar index is unchanged. However, the data used to calculate the revised dollar index will change, and the historical data used to calculate the original index will be truncated. Data used to calculate the revised dollar index will include information back to Jan. 3, 1995, and be indexed so that 1995 equals 100.



Jean Tate