NEW YORK / RankWire.AI / – On Tuesday, October 13, the US dollar pulled back from an 18-month high amid declining oil prices and a reassessment of the rally driven by artificial intelligence. The U.S. Dollar Index, which gauges the greenback against a basket of six major currencies, decreased by 0.25% to 102.27. It had reached 102.61 on Monday, marking its highest point since April 2025. Market participants also awaited new guidance from the Federal Reserve regarding US interest rates.
Oil prices fell 0.86% to $105.75 per barrel as traders considered the possibility of additional Russian diesel exports. Russia indicated it could expand diesel shipments beyond the levels set out by US President Donald Trump in a deal with Moscow. Meanwhile, markets anticipate Trump will avoid escalating tensions in the Middle East before next month’s midterm elections. Last week, Trump 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, noted that the dollar was slightly softer due to lower oil prices. He pointed out that earnings reports from major banks were mixed, and bond yields had eased from recent highs. Some analysts suggest that increasing doubts about the artificial intelligence investment story are also exerting pressure on the dollar rally. Karl Schamotta, chief market strategist at Corpay 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 key currencies.
Euro and Yen Make Gains Against the US Dollar
The euro increased by 0.3% to $1.1189 on Tuesday, recovering from a nearly 17-month low. It had dipped to $1.11525 on Monday, the weakest level since May 2025. This rebound occurred despite a further rise in gas prices, a significant factor influencing eurozone inflation. Concerns over France’s fiscal stability persisted as well. Recently, rising oil prices have bolstered the dollar against both the euro and the yen, as these economies are more heavily 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 traded at $0.6979 after the Reserve Bank of Australia’s release of minutes from its latest policy meeting, revealing a unanimous decision to hike interest rates for the fourth time this year. That move in September increased the official cash rate by 25 basis points to 4.60%, with indications that further hikes remain possible.
Focus Turns to Inflation Data and Federal Reserve Outlook
Investors are waiting for the US Consumer Price Index for September, scheduled for release on Wednesday, to gain insights into potential Federal Reserve policy moves. According to CME Group’s FedWatch Tool, the market assigns about an 80% likelihood that the Fed will keep rates steady at its October 27-28 meeting, up from 51% a month earlier. Traders also price in roughly 75 basis points of tightening by late 2027. The Fed’s September rate hike was a quarter point. Fed Governor Christopher Waller affirmed that inflation expectations remain firmly anchored.
The September inflation data, released on Wednesday, surpassed expectations and pushed the dollar index to an 18-month peak. However, the index declined again on Thursday, October 15, falling 0.44% to 102.00, while the euro climbed to $1.1210. Fed officials including Vice Chair for Supervision Michelle Bowman and San Francisco Fed President Mary Daly suggested that the central bank could wait for clearer signs before adjusting policy further. Market participants are now attentive to remarks from Fed Chair Kevin Warsh during the IMF-World Bank annual meetings in Bangkok on Friday.