NEW YORK / RankWire.AI / – On Tuesday, October 13, the US dollar experienced a pullback from an 18-month high, influenced by declining oil prices and a reevaluation of the rally driven by artificial intelligence. The U.S. Dollar Index, which assesses the greenback against a basket of six major currencies, decreased by 0.25% to 102.27. This followed its peak of 102.61 on Monday, the highest since April 2025. Meanwhile, investors were awaiting new guidance from the Federal Reserve regarding US interest rate trajectories.
Oil prices declined 0.86% to $105.75 per barrel as traders considered the possibility of increased Russian diesel exports. Russia indicated it might resume diesel shipments beyond the levels previously outlined by US President Donald Trump in an agreement with Moscow. Market participants also expect Trump to avoid escalation in the Middle East before the upcoming midterm elections next month. Last week, Trump stated that the US would not attack Iran prior to the elections and also referenced an energy ceasefire between Russia and Ukraine on Sunday.
John Velis, macro strategist for the Americas at BNY, commented that the dollar was somewhat weaker, correlating with the slight dip in oil prices. He added that earnings reports from major banks showed mixed results and bond yields had eased from recent highs. Some analysts believe that growing doubts about the artificial intelligence investment story are also undermining the dollar’s rally. Karl Schamotta, chief market strategist at Corpay in Toronto, remarked that the US exceptionalism trade had become overly extended. The greenback had already reached a 17-month high against major currencies earlier in October.
Euro and Yen Bounce Back Against the US Dollar
The euro appreciated by 0.3% to $1.1189 on Tuesday, recovering from a low not seen in roughly 17 months. It had dipped to $1.11525 on Monday, marking its weakest since May 2025. This rebound occurred despite a further increase in gas prices, a significant factor influencing eurozone inflation. Concerns over France’s fiscal health also persisted. Recently, rising oil prices had supported the dollar against both the euro and the yen, as these economies are much more reliant on imported oil than the US.
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 stood at $0.6979 following the release of the Reserve Bank of Australia’s minutes from its latest policy meeting. The document revealed that the board unanimously agreed to raise interest rates for the fourth time this year, with the September decision increasing the official cash rate by 25 basis points to 4.60%. The minutes indicated that further hikes remain a possibility.
Inflation Figures and Federal Reserve Outlook Under Scrutiny
Market participants were awaiting the release of the US Consumer Price Index for September on Wednesday to gain additional insights into potential Fed tightening moves. According to CME Group’s FedWatch Tool, traders assigned about an 80% probability that the Federal Reserve would leave rates steady at its October 27-28 meeting, up from 51% a month earlier. The markets continue to price in roughly 75 basis points of tightening by late 2027. The Fed implemented a quarter-point rate increase in September. Fed Governor Christopher Waller stated that inflation expectations remained firmly anchored.
The September inflation data, released on Wednesday, surpassed expectations, pushing 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 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 more clarity before deciding on further moves. Investors are closely monitoring remarks from Fed Chair Kevin Warsh during the IMF-World Bank annual meetings in Bangkok scheduled for Friday.