Dollar Index Falls on Tuesday

The dollar index weakened to 101.8 on Tuesday, pressured by an easing in concerns over high energy prices and the need for further monetary tightening. Oil prices fell to a one-month low amid signs that Middle East crude exports are recovering, helping to ease inflation concerns and reducing expectations for immediate further increases in the Fed funds rate. The Federal Reserve is widely expected to leave borrowing costs unchanged this month, while markets are pricing in a 25bps rate hike in December. The greenback weakened broadly, with the largest declines recorded against the euro. The common currency fell as much as 0.8% on Monday amid concerns over elevated debt and political deadlock in France, while the prospect of an upcoming snap election in Spain added to the headwinds.

The dollar index held above 102 on Tuesday, remaining near its strongest levels since April 2025 as the euro faced pressure from growing political uncertainty and fiscal concerns across Europe. The common currency fell as much as 0.8% on Monday amid worries over elevated debt and political deadlock in France, while an upcoming snap election in Spain added to the headwinds. The dollar also found support from surging Treasury yields, with long-term US bond yields reaching their highest levels in more than two decades. The moves came as the global bond selloff persisted, fueled by rising fiscal risks and ongoing inflation concerns. ISM data showed that cost pressures in the US services sector rose at their fastest pace in more than four years last month. Meanwhile, markets are pricing in roughly a 78% chance that the Fed will leave interest rates unchanged this month following weaker-than-expected US jobs data.

The dollar index climbed to around 102.5 on Monday, hitting its highest levels since April 2025 as the euro weakened sharply on fresh political uncertainty in Spain that added to concerns over France's political instability and and worsening fiscal outlook. The greenback also strengthened even as traders scaled back expectations for an imminent Federal Reserve rate hike following weaker-than-expected US jobs report. Data released Friday showed the US economy added just 29,000 jobs in September, well below expectations of 90,000, following a downwardly revised gain of 133,000 in August. The unemployment rate climbed to 4.2%, while annual wage growth unexpectedly slowed to 3.0%, its weakest pace since May 2021. Markets are now pricing in nearly an 80% chance that the Fed will keep policy unchanged this month, while expectations for a December hike remained around 69%.