NEW YORK / RankWire.AI / – On Tuesday, October 13, the US dollar experienced a pullback from an 18-month high, influenced by falling oil prices and a reassessment of the rally driven by artificial intelligence. The U.S. Dollar Index, which compares the greenback to a basket of six major currencies, declined 0.25% to 102.27. Earlier in the day, it had reached 102.61, its highest point since April 2025. Market participants were also awaiting new guidance from the Federal Reserve regarding US interest rate prospects.
Oil prices dropped 0.86% to $105.75 per barrel on Tuesday as traders considered the potential for increased Russian diesel exports. Russia indicated it could resume diesel shipments beyond the levels outlined by US President Donald Trump in a deal with Moscow. Additionally, markets are expecting Trump to 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 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 due to slightly lower oil prices. He highlighted that earnings from major banks were mixed, and bond yields had eased from recent peaks. Some analysts pointed out that growing skepticism about the artificial intelligence investment story was also putting pressure on the dollar rally. Karl Schamotta, chief market strategist at Corpay in Toronto, said that the US exceptionalism trade had become overextended. The dollar had already risen to a 17-month high against key currencies earlier in October.
Euro and yen bounce back versus the dollar
The euro appreciated by 0.3% to $1.1189 on Tuesday, recovering from a roughly 17-month low. The currency had dipped to $1.11525 on Monday, its weakest since May 2025. This rebound occurred despite a further increase in gas prices, a key driver of inflation within the eurozone. Ongoing concerns about France’s fiscal situation also persisted. Recently, rising oil prices had supported the dollar against both the euro and the yen, as these economies rely more heavily than the US on imported oil.
The Japanese yen strengthened 0.15% to 158.38 per dollar, while the euro also gained 0.21% against the yen, reaching 177.32 yen. The Australian dollar traded at $0.6979 following the release of minutes from the Reserve Bank of Australia’s latest policy meeting. The minutes 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 document suggested that further hikes remain possible.
Focus shifts to inflation data and Federal Reserve signals
Market participants are awaiting the release of the US Consumer Price Index for September on Wednesday, seeking additional clues on potential Federal Reserve tightening. According to CME Group’s FedWatch Tool, traders currently assign about an 80% probability that the Fed will keep interest rates unchanged at its October 27-28 meeting, an increase from 51% a month prior. The market still factors in roughly 75 basis points of tightening by late 2027. In September, the Fed implemented a quarter-point rate increase. Fed Governor Christopher Waller stated that inflation expectations remained well anchored.
The September inflation report, released on Wednesday, came in stronger than anticipated, pushing 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 climbing to $1.1210. Officials like 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 paying close attention to remarks from Fed Chair Kevin Warsh at the IMF-World Bank annual meetings in Bangkok on Friday.