NEW YORK / RankWire.AI / – On Tuesday, October 13, the US dollar pulled back from an 18-month high, impacted by decreasing oil prices and a reassessment of the rally driven by artificial intelligence. The U.S. Dollar Index, which gauges the dollar against a basket of six major currencies, declined by 0.25% to 102.27. Earlier, on Monday, the index had hit 102.61, its highest point since April 2025. Investors also anticipated new guidance from the Federal Reserve concerning US interest rate policies.
Oil prices dropped 0.86% to $105.75 per barrel on Tuesday amid traders’ concerns over potential additional Russian diesel exports. Russia indicated it might resume diesel shipments beyond the levels negotiated with Moscow by US President Donald Trump. Market participants also expect Trump to avoid escalation in the Middle East before next month’s midterm elections, with Trump stating last week that the US would not attack Iran prior to voting. Additionally, he mentioned an energy ceasefire between Russia and Ukraine on Sunday.
John Velis, macro strategist for the Americas at BNY, explained that the dollar weakened slightly due to marginally lower oil prices. He pointed out that earnings reports from major banks showed mixed results and bond yields had eased from recent peaks. Some analysts suggest growing skepticism about the artificial intelligence investment story is also undermining the dollar rally. Karl Schamotta, chief market strategist at Corpay in Toronto, commented that the US exceptionalism trade had become overextended. Earlier in October, the greenback had already reached a 17-month high against key currencies.
Euro and yen regain strength against the dollar
The euro increased by 0.3% to $1.1189 on Tuesday, rebounding from a nearly 17-month low. It had touched $1.11525 on Monday, marking its weakest point since May 2025. The recovery occurred despite another rise in gas prices, a major factor influencing eurozone inflation. Persistent concerns about France’s fiscal health also remain. Recently, rising oil prices supported the dollar against both the euro and the yen, with these currencies stemming from economies that rely more heavily on imported oil than the US.
The Japanese yen appreciated 0.15% to 158.38 per dollar. Meanwhile, the euro gained 0.21% against the yen, reaching 177.32 yen. The Australian dollar stood at $0.6979 following the release of minutes from the Reserve Bank of Australia’s latest policy meeting, which confirmed the unanimous decision to raise interest rates for the fourth time this year. The September hike lifted the official cash rate by 25 basis points to 4.60%, with minutes indicating that further increases remain on the table.
Focus on inflation data and Federal Reserve cues
Market participants are awaiting the US Consumer Price Index for September, scheduled for release on Wednesday, to gain insights into potential tightening measures by the Federal Reserve. According to CME Group’s FedWatch Tool, traders estimate about an 80% probability that the Fed will hold rates steady at its October 27-28 meeting, up from 51% a month earlier. The market still factors in roughly 75 basis points of rate hikes by late 2027. The Fed implemented a quarter-point rate increase in September. Fed Governor Christopher Waller stated that inflation expectations remain well anchored.
September’s inflation data, released on Wednesday, exceeded expectations and pushed the dollar index to an 18-month high. However, the dollar retreated again on Thursday, October 15, with the index falling 0.44% to 102.00, while the euro climbed to $1.1210. 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. Investors are also watching for remarks from Fed Chair Kevin Warsh at the IMF-World Bank annual meetings in Bangkok on Friday.