CME to launch single index on seven currencies against US dollar

The Chicago Mercantile Exchange (CME) will launch its new ‘CME$Index’ futures contract, an index of seven foreign currencies against the US dollar, on March 3. The contract is intended to provide end-users with a broad tool to gain or reduce their exposures to the US dollar.

The contract is based on the major currency index published by the US Federal Reserve and includes euro, Japanese yen, British pound, Swiss franc, Australian dollar, Canadian dollar and Swedish krona currencies.

The weighting assigned to each currency in the index is estimated to reflect the competitiveness of US goods versus that specific country's goods in world markets. For example, the weight given to Canada should represent the competitiveness of US goods against Canadian goods in markets outside either of the two countries. The biggest weighting goes to the euro, with 42%. This is followed by the Japanese yen with 30%.

“In uncertain times, a tool that provides an efficient and immediate way to gain or reduce broad exposure to the US dollar becomes increasingly useful,” said CME chief executive Jim McNulty. “Hedge funds and other professional money managers will have greater ability to manage risk in a portfolio of international equities, fixed income or foreign exchange instruments,” he added.

The first expiration to be listed will be June. The contract will be traded on the CME’s trading floor and on its Globex electronic trading platform.