The US Dollar Index (DXY) weakened to around 101.5 on Tuesday (October 20), marking its lowest level in nearly three weeks. Pressure on the greenback stems from mounting concerns regarding AI investments, a decline in oil prices—driven by hopes for a diplomatic resolution to the conflict involving Iran—and US housing sector data that fell short of expectations.
Recent data shows that housing starts dropped by 5.2% in September, while pending home sales fell to a record low. These conditions indicate that high mortgage rates continue to weigh on demand for housing in the US, fueling concerns about the overall resilience of the economy.
Regarding monetary policy, the market is increasingly confident that the Federal Reserve will keep interest rates unchanged at next week’s meeting. However, expectations for a rate hike in December remain strong, meaning the dollar’s current weakness could still be reversed if market expectations regarding Fed policy shift.
Meanwhile, the euro has begun to rebound as social tensions in France have eased slightly. The Japanese yen also strengthened, snapping a two-day losing streak following a robust demand for long-term Japanese government bonds.
Newsmaker Analysis: The dollar is currently under pressure from a combination of weakening US economic data, diminished expectations for an October rate hike, and concerns surrounding AI investments. Should US economic data continue to signal a slowdown, the potential for the DXY to strengthen may become increasingly limited. Nevertheless, expectations for a rate hike in December remain a supporting factor that could prevent a deeper decline in the dollar.