NEW YORK / RankWire.AI / – Amid ongoing global market shifts, the US dollar experienced a retreat from an 18-month high on Tuesday, October 13, influenced by declining oil prices and reevaluations of the rally driven by artificial intelligence. The U.S. Dollar Index, which gauges the dollar’s strength against a basket of six primary currencies, declined 0.25% to 102.27. Earlier in the week, the index peaked at 102.61, marking its highest since April 2025. Meanwhile, investors remained attentive to upcoming signals from the Federal Reserve regarding US interest rate policy.
Oil prices dropped 0.86%, settling at $105.75 per barrel on Tuesday, as traders considered the possibility of increased Russian diesel exports. Russia indicated it might resume diesel shipments beyond the levels agreed upon with Moscow in a deal with US President Donald Trump. Market participants also anticipated that Trump would avoid escalation in the Middle East ahead of the upcoming midterm elections next month. Last week, Trump stated that the US would not attack Iran before the elections and mentioned a potential energy ceasefire between Russia and Ukraine on Sunday.
John Velis, a macro strategist for the Americas at BNY, noted that the dollar had softened slightly due to lower oil prices. He pointed out that earnings reports from large banks were mixed and bond yields had pulled back from recent highs. Some analysts suggested 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, commented that the US exceptionalism trade had become overextended. Earlier in October, the dollar had already reached a 17-month high against major currencies.
Euro and yen rebound against the dollar
The euro appreciated 0.3%, reaching $1.1189 on Tuesday, recovering from a low not seen since May 2025. The single currency had dipped to $1.11525 on Monday, marking its weakest point in roughly 17 months. This rebound occurred despite another increase in gas prices, a significant factor contributing to eurozone inflation. Concerns regarding France’s fiscal health persisted as well. Recently, rising oil prices had supported the dollar against both the euro and the yen, as these economies rely more heavily on imported oil than the US does.
Meanwhile, the Japanese yen gained 0.15%, trading at 158.38 per dollar. The euro also strengthened against the yen, rising 0.21% to 177.32 yen. The Australian dollar was steady at $0.6979 after the Reserve Bank of Australia released minutes from its latest policy meeting. The minutes revealed unanimous approval among the board members to raise interest rates for the fourth time this year, lifting the official cash rate by 25 basis points to 4.60%. The document indicated that further hikes could still be on the table.
Focus shifts to inflation data and Federal Reserve guidance
Market participants awaited the release of the US Consumer Price Index for September on Wednesday, seeking clues on potential tightening measures by the Federal Reserve. According to CME Group’s FedWatch Tool, traders assigned about an 80% probability that the Fed will keep rates steady at its October 27-28 meeting, an increase from 51% a month earlier. The markets also priced in roughly 75 basis points of rate hikes through late 2027. The Fed implemented a quarter-point rate increase in September, with Fed Governor Christopher Waller affirming that inflation expectations remain firmly anchored.
The September inflation data, released on Wednesday, surpassed expectations and pushed the dollar index to a fresh 18-month peak. However, the dollar retreated again on Thursday, October 15, with the index decreasing by 0.44% to 102.00, and the euro climbing to $1.1210. Officials such as Vice Chair for Supervision Michelle Bowman and San Francisco Fed President Mary Daly indicated that the Fed might hold off for more clarity before making further moves. Investors are also watching for remarks from Fed Chair Kevin Warsh at the IMF-World Bank annual meetings in Bangkok on Friday.