NEW YORK / RankWire.AI / – On Tuesday, October 13, the US dollar retreated from its 18-month high as a combination of declining oil prices and a reassessment of the AI-driven rally exerted downward pressure on the currency. The U.S. Dollar Index, which gauges the dollar’s performance against a basket of six major currencies, decreased by 0.25% to 102.27. Earlier in the day, the index had hit 102.61, marking its highest point since April 2025. Meanwhile, investors were also waiting for new insights from the Federal Reserve regarding future US interest rate policies.
Oil prices declined by 0.86%, settling at $105.75 per barrel on Tuesday, amid traders contemplating the potential increase in Russian diesel supplies. Russia indicated it might resume diesel exports beyond the levels set in a deal with Moscow negotiated by US President Donald Trump. Market participants also anticipate that Trump will avoid escalation in the Middle East before the upcoming midterm elections next month. Last week, Trump stated that the US would not attack Iran before the elections, and on Sunday, he mentioned a possible energy ceasefire between Russia and Ukraine.
John Velis, the Americas macro strategist at BNY, commented that the dollar experienced some weakening due to slightly lower oil prices. He also pointed out that earnings reports from major banks showed mixed results and bond yields had eased from recent peaks. Some analysts argued that growing skepticism about the artificial intelligence investment narrative was also putting pressure on the dollar rally. Karl Schamotta, chief market strategist at Corpay in Toronto, remarked that the US exceptionalism trade had become overstretched. Earlier in October, the greenback had already surged to a 17-month high against key currencies.
Euro and Yen Recover Against the US Dollar
The euro appreciated by 0.3%, reaching $1.1189 on Tuesday, rebounding from a nearly 17-month low. The currency had dipped to $1.11525 on Monday, its lowest point since May 2025. This recovery occurred despite another jump in natural gas prices, a significant factor driving eurozone inflation. Concerns over France’s fiscal health also persisted. Recently, rising oil prices supported the dollar against both the euro and the yen, as these economies depend far more on imported oil than the US does.
Meanwhile, the Japanese yen strengthened by 0.15% to 158.38 per dollar. The euro also gained 0.21% against the yen, reaching 177.32 yen. The Australian dollar was steady at $0.6979 following the release of minutes from the latest Reserve Bank of Australia policy meeting. The minutes revealed that the board unanimously agreed to raise interest rates for the fourth time this year, with the September hike boosting the official cash rate by 25 basis points to 4.60%. The document indicated that additional increases remain on the table.
Focus on Inflation Data and Federal Reserve Outlook
Market participants are closely monitoring the upcoming US Consumer Price Index report for September, scheduled for Wednesday, seeking further guidance on potential Fed rate hikes. According to CME Group’s FedWatch Tool, traders now assign about an 80% probability that the Federal Reserve will keep rates steady at its October 27-28 meeting, up from 51% a month earlier. The market currently prices in roughly 75 basis points of tightening by late 2027. The Fed implemented a quarter-point rate increase in September. Fed Governor Christopher Waller noted that inflation expectations remain firmly anchored.
The September inflation figures, released on Wednesday, surpassed expectations and pushed the dollar index to an 18-month peak. Nonetheless, the dollar retreated again on Thursday, October 15, falling 0.44% to 102.00, while the euro climbed to $1.1210. Officials including Vice Chair for Supervision Michelle Bowman and San Francisco Fed President Mary Daly indicated that the central bank might hold off on further rate moves until more clarity emerges. Market attention is also on remarks from Fed Chair Kevin Warsh, scheduled to speak at the IMF-World Bank annual meetings in Bangkok on Friday.
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