Quick Answer: What is the DXY, and why does it matter to a Saudi investor?
- The US Dollar Index (DXY) measures the dollar against six major currencies, led by the euro at 57.6%.
- The index dates back to March 1973, with a base value of 100, and is now administered and published by ICE Data Indices.
- The riyal has been pegged at 3.75 per US dollar since 1986, so SAR investors face little USD/SAR risk on US stocks while the peg holds.
- Dollar moves still reach you through US company earnings, oil and gold, Saudi interest rates and non-dollar assets.
What you will learn
- What the DXY is and which currencies it holds
- What tends to move the dollar
- Why the SAR peg changes the currency picture
- Five ways dollar strength can still reach your portfolio
Should a riyal saver care when the dollar hits a new high? The peg limits your direct USD/SAR exchange-rate exposure, but it does not shield you from every dollar effect. Dollar moves can still reach Saudi investors through company earnings, commodities, interest rates and any non-dollar assets they hold.
What is the US Dollar Index (DXY)?
The DXY tracks the US dollar against a fixed basket of six major currencies. The index dates back to March 1973, when it started at a base value of 100, and is now administered and published by ICE Data Indices, part of Intercontinental Exchange (ICE). A reading above 100 means the dollar is stronger against the basket than it was in March 1973.
| Currency | Weight in DXY |
|---|---|
| Euro (EUR) | 57.6% |
| Japanese yen (JPY) | 13.6% |
| British pound (GBP) | 11.9% |
| Canadian dollar (CAD) | 9.1% |
| Swedish krona (SEK) | 4.2% |
| Swiss franc (CHF) | 3.6% |
Weights have been fixed since the euro arrived in 1999, so the euro has the largest influence on the DXY, although all six currencies affect it. It excludes the Chinese yuan and all GCC currencies.
What moves the dollar up or down?
The dollar mainly responds to interest rate gaps, growth differences and global risk mood. When US interest rates rise relative to those in other major economies, higher relative US yields can make dollar-denominated assets more attractive to global investors, which can support the dollar.
Stronger US growth and safe-haven demand in stressful periods can also lift it. The IMF noted in October 2022 that the dollar hit its highest level since 2000, driven mainly by fast Fed rate hikes and an energy shock. Because these forces often pull in different directions, dollar moves are hard to predict.
Does the SAR peg protect Saudi investors from currency risk?
It limits one specific risk: with the riyal pegged at 3.75 per dollar, a SAR investor buying US stocks faces very little direct USD/SAR exchange-rate risk. The riyal has been pegged at this rate since 1986, and in its 2026 Article IV consultation (concluded in July 2026), the IMF Executive Board agreed that the peg to the US dollar remains appropriate.
So USD 1,000 converts to about SAR 3,750 and back at roughly the same rate. A European investor lacks this protection.
Limits remain: banks may charge conversion spreads, a peg is a policy choice rather than a guarantee, and stock market risk stays. Dividends are paid in dollars, and US-source dividends paid to nonresident investors are generally subject to US withholding tax. The rate that applies depends on the investor’s tax status and any available treaty benefits, as our guide to US dividend withholding tax for Saudi and GCC investors explains.
Where does dollar strength still matter for Saudi investors?
Even with the peg, the dollar can affect your portfolio through five indirect channels.
- US multinational earnings. A strong dollar turns euro or yen sales into fewer dollars, which can weigh on reported profits.
- Oil and gold. Commodities are mostly priced in dollars, and a weaker dollar has been cited among reasons for gold's rise. Oil matters too, as covered in how oil prices affect Saudi stocks.
- Saudi interest rates. The IMF's 2025 Article IV staff report notes that Saudi monetary policy tracks the US rate cycle, with SAMA's policy rate aligned to the Fed's. So Fed moves tend to shape local deposit and loan rates.
- Emerging market flows. A strong dollar tightens conditions for emerging markets with dollar debt, the IMF notes.
- Non-dollar assets and spending. A strong dollar makes European or Japanese goods and travel cheaper in riyals, but cuts the SAR value of euro or yen assets you own.
| Dollar move | What it can mean for a SAR-based investor |
|---|---|
| Dollar strengthens | Foreign earnings of US multinationals may shrink; gold may face pressure; European and Japanese imports and travel may cost fewer riyals; euro or yen assets may lose SAR value |
| Dollar weakens | US firms with big foreign sales may benefit; gold may find support; European goods and travel may cost more riyals; non-dollar assets may gain SAR value |
| Either direction | USD/SAR stays near 3.75 while the peg holds, so US stocks move in riyals almost one-for-one with their dollar prices |
The peg means your riyals reach US stocks without a USD/SAR currency bet. Start from just $1 (about SAR 3.75) with fractional investing. Open your free Raseed Invest account →
How can SAR-based investors think about the dollar in practice?
Focus on understanding your exposure, not forecasting the dollar. First, check where your companies earn money. A US firm selling mostly at home is less sensitive to currency swings than a global one.
Second, spread risk across sectors and regions, as our guide to diversification explains. Third, know what each fund adds: a European fund adds euro exposure, while energy funds add commodity sensitivity.
Fourth, if you follow Shariah principles, note that currency movements do not by themselves determine whether a stock is Shariah compliant. Screening also depends on the company's business activities, its financial ratios and the methodology used, and results can change over time, so check a recognised screening methodology or a qualified scholar.
Prefer a steady plan over guessing the dollar? Set up recurring investments in US stocks and ETFs, with a $5 minimum deposit and no inactivity fees. Explore US stocks on Raseed →
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