NEW YORK / RankWire.AI / – On Tuesday, October 13, the US dollar experienced a decline from an 18-month high, influenced by decreasing oil prices and a reassessment of the rally driven by artificial intelligence. The U.S. Dollar Index, which gauges the dollar’s strength against a basket of six major currencies, fell 0.25% to 102.27. The index had touched 102.61 on Monday, marking its highest point since April 2025. Traders also awaited new guidance from the Federal Reserve regarding US interest rate policies.
Oil prices declined by 0.86% to $105.75 per barrel as traders considered the possibility of additional diesel exports from Russia. Russia indicated it might restore diesel shipments beyond the levels specified by US President Donald Trump in an agreement with Moscow. Markets also anticipate that Trump will avoid escalation in the Middle East ahead of next month’s midterm elections. Last week, Trump stated that the US would not attack Iran before the elections and also mentioned a proposed energy ceasefire between Russia and Ukraine on Sunday.
John Velis, Americas macro strategist at BNY, explained that the dollar weakened slightly in response to lower oil prices. He observed that earnings reports from major banks were mixed, and bond yields had eased from recent peaks. Some analysts believe growing skepticism about the artificial intelligence investment narrative is also pressuring 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 surged to a 17-month high against key currencies.
Euro and yen rebound against the dollar
The euro increased by 0.3% to $1.1189 on Tuesday, recovering from a roughly 17-month low. It had dipped to $1.11525 on Monday, its weakest point since May 2025. This rally occurred despite another rise in gas prices, a significant factor fueling eurozone inflation. Ongoing concerns about France’s fiscal situation also persisted. Recently, rising oil prices supported the dollar against both the euro and the yen, as these economies depend more heavily than the US on imported oil.
Meanwhile, the Japanese yen strengthened by 0.15% to 158.38 per dollar. The euro also appreciated 0.21% against the yen, reaching 177.32 yen. The Australian dollar held at $0.6979 after the Reserve Bank of Australia published minutes from its latest monetary policy meeting, showing a 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 indications that further increases remain possible.
Focus shifts to inflation data and Fed indications
Market participants await the release of the US Consumer Price Index for September, scheduled for Wednesday, seeking clues on potential Fed tightening moves. According to CME Group’s FedWatch Tool, traders assign about an 80% probability that the Fed will leave rates unchanged at its October 27-28 meeting, up from 51% a month earlier. Markets still factor in roughly 75 basis points of additional tightening by late 2027. The Fed implemented a quarter-point rate increase in September. Fed Governor Christopher Waller highlighted that inflation expectations remain well anchored.
The September inflation data, released on Wednesday, surpassed expectations and pushed the dollar index to an 18-month high. However, the dollar retreated again on Thursday, October 15, with the index dropping 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 Fed might wait for clearer economic signals. Investors are also monitoring remarks from Fed Chair Kevin Warsh at the IMF-World Bank annual meetings in Bangkok on Friday.