The US Dollar Index (USDX) is an index (or measure) of the value of the United States dollar relative to a basket of foreign currencies, often referred to as a basket of US trade partners' currencies.
These currencies are the Euro (constituting 57.6% of the weighting), Japanese Yen (13.6%), British Pound (11.9%), Canadian Dollar (9.1%), Swedish Krona (4.2%) and Swiss Franc (3.6%).
The index started in 1973 with a base of 100.000, and values since then are relative to this base. For example, if the current reading says 99.800, this means that the dollar has fallen 0.2% since the start of the index (99.800 - 100.000).
In terms of strategy, the Dollar Index is widely used to hedge risk in the currency markets or to take a position in the US Dollar without having the risk exposure of a single currency pair.