The US dollar traded mixed against several major currencies on Wednesday (October 21), as uncertainty surrounding the Federal Reserve’s monetary policy path grew amid a surge in global oil prices. The US Dollar Index (DXY) edged down 0.03% to 101.70, while the euro fell 0.05% to US$1.1231. Geopolitical tensions between the United States and Iran reignited inflation concerns after oil prices jumped by more than US$2 per barrel, with Brent crude approaching its highest level in five months. A decline in US inventories of crude oil and energy products further fueled the price rally, leaving investors increasingly cautious ahead of the Federal Reserve’s upcoming meeting on October 27–28.
Meanwhile, the US dollar’s movement remains clouded by uncertainty regarding the outlook for the artificial intelligence (AI) sector—a key driver of economic growth and investment inflows into the United States. Concerns over the sustainability of the rally in tech stocks initially weighed on market sentiment, though optimism began to recover after SpaceX reported its first profit as a public company and Elon Musk floated the possibility of a merger with Tesla. Additionally, Super Micro Computer provided a boost to sentiment by issuing revenue and profit margin forecasts that exceeded Wall Street’s expectations. Nevertheless, these developments have yet to provide a clear direction for the US dollar, particularly as investors continue to await signals regarding the Fed’s interest rate policy for the remainder of the year.
Elsewhere in the foreign exchange market, the Australian dollar rose 0.4% to US$0.703 after Reserve Bank of Australia Deputy Governor Andrew Hauser warned that the country’s inflation outlook had worsened, fueling expectations of an interest rate hike. The British pound remained stable, even as UK inflation—which came in higher than anticipated—strengthened the likelihood of monetary tightening by the Bank of England in November. The Japanese yen... ...strengthened by 0.08% to 158.04 per US dollar after the Bank of Japan signaled the possibility of further interest rate hikes. Meanwhile, the euro remains under pressure due to a wave of demonstrations in France and deteriorating fiscal conditions, which have pushed the yield on 10-year French government bonds to a 24-year high.
Newsmaker’s Point of View
The relatively stagnant movement of the US dollar suggests that the market is caught in a tug-of-war between inflation risks—driven by a surge in oil prices—and uncertainty regarding the Federal Reserve’s policy direction. The conflict in the Middle East could boost demand for the dollar as a safe-haven asset, while high energy prices might reinforce expectations for elevated interest rates. However, concerns over the valuation of technology stocks and the outlook for US economic growth continue to act as headwinds for the greenback.
From a technical perspective, the US Dollar Index (DXY) faces psychological resistance around the 102.00 level. A successful breakout above this point could open the door for further gains toward the 102.30–102.50 range. Conversely, if selling pressure intensifies, the DXY may test support levels between 101.50 and 101.00. These scenarios remain subject to confirmation through actual price action.
Newsmaker’s Conclusion: The US dollar is expected to remain in a consolidation phase ahead of the Federal Reserve’s decision. Should the central bank signal a hawkish stance regarding interest rate hikes in December, the dollar could strengthen, putting pressure on gold. On the other hand, if the Fed adopts a more cautious approach toward monetary tightening, the dollar may weaken, potentially allowing for a recovery in gold and the currencies of emerging markets, including the Indonesian rupiah.