13.10.202608:56:08UTC+00Dollar Falls on Tuesday

The dollar index eased to 102.3 on Tuesday, pulling back from 102.6 in the previous session, its highest level in 18 months. The decline coincided with lower oil prices and falling US Treasury yields, even as a tech-led equity sell-off underpinned safe-haven demand. Investors are now focused on key US inflation releases due this week, including Wednesday’s CPI report, for clearer signals on the inflation trajectory and the Federal Reserve’s next policy moves.

At the same time, markets have pared expectations of another 25 bps rate hike at this month’s meeting, assigning roughly a 19% probability to such a move. For December, however, futures pricing indicates nearly a 72% chance of a 25 bps increase in the federal funds rate.

The dollar weakened broadly, with its sharpest losses against the yen after Japan’s wholesale inflation undershot forecasts. Still, underlying price pressures in Japan continued to support expectations for additional rate hikes by the Bank of Japan.