NEW YORK / RankWire.AI / – On Tuesday, October 13, the US dollar moved back from an 18-month high, pressured by falling oil prices and a reassessment of the rally driven by artificial intelligence. The U.S. Dollar Index, which tracks the greenback against a basket of six major currencies, declined 0.25% to 102.27. This followed a peak of 102.61 on Monday, the highest since April 2025. Investors also awaited new indications from the Federal Reserve regarding the future of US interest rates.
Oil prices dropped 0.86% to $105.75 per barrel as traders considered the possibility of increased Russian diesel exports. Russia indicated it might resume diesel shipments beyond the levels agreed upon by US President Donald Trump in a deal with Moscow. Market participants also expect Trump to avoid escalation in the Middle East ahead of the upcoming midterm elections next month. Last week, Trump stated that the US would not attack Iran before the elections and also mentioned an energy ceasefire between Russia and Ukraine on Sunday.
John Velis, a macro strategist for the Americas at BNY, remarked that the dollar was somewhat weaker, correlating with the slight dip in oil. He pointed out that earnings reports from major banks showed mixed results, and bond yields had eased from recent highs. Some analysts argued that increasing skepticism about the artificial intelligence investment story was also weighing on the dollar’s rally. Karl Schamotta, chief market strategist at Corpay in Toronto, commented that the US exceptionalism trade had become overextended. The greenback had already hit a 17-month high against major currencies earlier in October.
Euro and yen gain ground against the dollar
The euro appreciated 0.3% to $1.1189 on Tuesday, rebounding from a low not seen since May 2025. The single currency had fallen to $1.11525 on Monday, its weakest level in roughly 17 months. This recovery occurred despite another surge in gas prices, a significant factor influencing eurozone inflation. Concerns over France’s fiscal outlook persisted. Recently, rising oil prices supported the dollar against both the euro and the yen, given that these economies rely far more on imported oil than the US does.
The Japanese yen strengthened by 0.15% to 158.38 per dollar. Meanwhile, the euro increased 0.21% against the yen, reaching 177.32 yen. The Australian dollar stood at $0.6979 after the Reserve Bank of Australia released minutes from its latest monetary policy meeting. The document revealed a unanimous decision to raise interest rates for the fourth time in 2023, with the September hike lifting the official cash rate by 25 basis points to 4.60%. The minutes indicated that further rate increases remain a possibility.
Focus shifts to inflation data and Federal Reserve signals
Investors are awaiting the release of the US Consumer Price Index for September, scheduled for Wednesday, as it is expected to offer additional insights into potential Fed policy tightening. According to CME Group’s FedWatch Tool, there is about an 80% probability that the Fed will keep interest rates steady at its October 27-28 meeting, up from 51% a month earlier. Markets continue to price in approximately 75 basis points of rate hikes by late 2027. The Fed’s September rate increase was a quarter point. Fed Governor Christopher Waller stated that inflation expectations remain well anchored.
The September inflation report exceeded expectations on Wednesday, pushing the dollar index to an 18-month high. However, the dollar retreated again on Thursday, October 15, with the index decreasing 0.44% to 102.00, while the euro rose to $1.1210. Several Fed officials, including Vice Chair for Supervision Michelle Bowman and San Francisco Fed President Mary Daly, indicated that the central bank might wait for more clarity before further action. Market participants are paying close attention to remarks from Fed Chair Kevin Warsh at the upcoming IMF-World Bank annual meetings in Bangkok on Friday.
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