NEW YORK / RankWire.AI / – On Tuesday, October 13, the US dollar experienced a retreat from an 18-month high, driven by declining oil prices and a reassessment of the rally fueled by artificial intelligence. The U.S. Dollar Index, which gauges the dollar’s strength against a basket of six primary currencies, decreased by 0.25% to 102.27. Earlier on Monday, the index had reached 102.61, marking its highest point since April 2025. Market participants were also awaiting new guidance from the Federal Reserve regarding US interest rate policies.
Oil prices declined 0.86% to $105.75 per barrel amid traders contemplating the possibility of increased Russian diesel exports. Russia indicated it could resume diesel shipments beyond the limits established by US President Donald Trump in a deal with Moscow. Additionally, investors are expecting 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 referenced an energy ceasefire between Russia and Ukraine on Sunday.
John Velis, macro strategist for the Americas at BNY, noted that the dollar weakened slightly due to lower oil prices. He pointed out that earnings reports from major banks showed mixed results and bond yields had receded from recent peaks. Some analysts suggest that mounting skepticism about the artificial intelligence investment story is also exerting downward pressure on the dollar rally. Karl Schamotta, Corpay’s chief market strategist in Toronto, commented that the US exceptionalism trade had become overly stretched. Earlier in October, the greenback had already climbed to a 17-month high against other key currencies.
Euro and yen recover versus the US dollar
The euro appreciated by 0.3%, reaching $1.1189 on Tuesday, bouncing back from a low not seen in approximately 17 months. It had dipped to $1.11525 on Monday, its weakest level since May 2025. This upward movement occurred despite another surge in gas prices, which remains a significant factor influencing inflation within the eurozone. Ongoing concerns about France’s fiscal situation persisted as well. The recent rise in oil prices supported the US dollar against both the euro and the yen, as these economies are more reliant than the US on imported oil.
The Japanese yen strengthened by 0.15% to 158.38 per dollar. Meanwhile, the euro gained 0.21% against the yen, reaching 177.32 yen. The Australian dollar traded at $0.6979 following the release of the Reserve Bank of Australia’s latest policy meeting minutes. The document revealed the board’s unanimous decision to raise interest rates for the fourth time this year, lifting the official cash rate by 25 basis points to 4.60%. The minutes also indicated that further increases remain a possibility.
Inflation Data and Fed Outlook Under Scrutiny
Investors are focusing on the upcoming US Consumer Price Index report for September, scheduled for release on Wednesday, to gain insight into potential Federal Reserve tightening. According to CME Group’s FedWatch Tool, markets assign about an 80% probability that the Fed will keep interest rates steady at its October 27-28 meeting, up from 51% a month earlier. Market pricing still includes around 75 basis points of tightening by late 2027. The Fed’s quarter-point rate hike in September was part of its ongoing efforts. Fed Governor Christopher Waller emphasized that inflation expectations remain firmly anchored.
The September inflation report, released on Wednesday, surpassed expectations, pushing the dollar index to an 18-month peak. However, the dollar retreated again on Thursday, October 15, with the index decreasing by 0.44% to 102.00 and the euro rising to $1.1210. Officials including Vice Chair for Supervision Michelle Bowman and San Francisco Fed President Mary Daly indicated that the Federal Reserve might wait for more clarity before adjusting policy further. Market attention is now on remarks from Fed Chair Kevin Warsh at the IMF-World Bank annual meetings in Bangkok scheduled for Friday.
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