The U.S. dollar index – how low can it go?

The U.S. dollar index (DXY) continued to take a beating in late September, setting consecutive all-time lows on Sept. 24 and 25.

The DXY fell intraday to 78.31 on Sept. 24, besting the previous low of 78.33 set in September 1992. Although the index rallied to close at 78.42, it traded as low as 78.10 the next day.

While the British pound was the main culprit earlier in the year, trading at an almost 30-year-high of 2.0654 in late July, the euro and the Canadian dollar (CAD) were most responsible for the latest DXY decline.

The euro hit an all-time high of 1.4154 on Sept. 25 amid continuing concerns about the U.S. economic outlook. The euro has gained 7.25 percent on the greenback since the beginning of 2007.

The Canadian dollar had already set decade-old highs when it traded above 0.91 in May, but the big news occurred on Sept. 20, when the CAD reached 1.00 vs. the buck — the first time ever the two currencies were equal in value.

While not considered in the calculation of the DXY, the Australian (AUD) and New Zealand (NZD) dollars also have made big gains against the U.S. dollar. Although both currencies are well off their 2007 highs (set at the end of July), the AUD has gained 13 percent on the dollar since mid-August and the Kiwi has climbed more than 11 percent in the same time period.

The dollar index is comprised of six currencies the euro, the Japanese yen, the Canadian dollar, the British pound, the Swedish krona, and the Swiss franc. Each currency is given a different weight in the index’s calculation, with the euro having the most influence.

The DXY began in 1973 based on a level of 100. With the index trading around 78, that indicates the dollar has lost 22 percent of its value since it began. The DXY’s 2007 high is 85.25, reached on Jan. 26. The last time the index closed above 100 was April 15, 2003.