NEW YORK / RankWire.AI / – On Tuesday, October 13, the US dollar pulled back from an 18-month peak, 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 key currencies, declined 0.25% to 102.27 after reaching 102.61 on Monday, its highest since April 2025. Investors also awaited new signals from the Federal Reserve regarding US interest rate prospects.
Oil prices dropped 0.86% to $105.75 per barrel as traders considered the possibility of additional Russian diesel exports, with Russia indicating it could resume shipments beyond the levels outlined by US President Donald Trump in a deal with Moscow. Markets also anticipate Trump will avoid escalation in the Middle East before next month’s midterm elections; last week, he stated that the US would not attack Iran before the elections, and on Sunday, he mentioned an energy ceasefire between Russia and Ukraine.
John Velis, macro strategist for the Americas at BNY, commented that the dollar was slightly weaker due to lower oil prices, noting that earnings from major banks showed mixed results and bond yields had eased from recent highs. Some analysts believe growing doubts about the artificial intelligence investment story are also challenging the dollar’s upward momentum. Karl Schamotta, chief market strategist at Corpay in Toronto, mentioned that the US exceptionalism trade had become overextended, with the greenback already climbing to a 17-month high against major currencies earlier in October.
Euro and yen gain against the dollar
The euro appreciated 0.3% to $1.1189 on Tuesday, rebounding from a roughly 17-month low. It had fallen to $1.11525 on Monday, its weakest level since May 2025. This recovery occurred despite another increase in gas prices, which remain a key inflation driver for the eurozone. Concerns over France’s fiscal outlook also persisted. Recently, rising oil prices supported the dollar against both the euro and the yen, as these currencies come from economies more heavily reliant on imported oil than the US.
Meanwhile, the Japanese yen strengthened 0.15% to 158.38 per dollar, while the euro 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 Reserve Bank of Australia’s latest policy meeting, which revealed a unanimous decision to raise interest rates for the fourth time this year. The September hike increased the official cash rate by 25 basis points to 4.60%, with indications that further increases could still occur.
Inflation figures and Fed expectations in focus
Market participants await the US Consumer Price Index for September, scheduled for release on Wednesday, seeking clues on potential Federal Reserve rate hikes. According to CME Group’s FedWatch Tool, traders now assign about an 80% probability that the Fed will keep rates steady at its October 27-28 meeting, up from 51% a month earlier. The markets also price in roughly 75 basis points of tightening by late 2027. The Fed implemented a quarter-point rate increase in September, with Fed Governor Christopher Waller affirming that inflation expectations remain well anchored.
The September inflation data, released on Wednesday, exceeded expectations and pushed the dollar index to a new 18-month high. However, the currency retreated again on Thursday, October 15, with the index dropping 0.44% to 102.00 and the euro rising 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 before making further moves. Investors are also monitoring remarks from Fed Chair Kevin Warsh at the IMF-World Bank annual meetings in Bangkok on Friday.