US Dollar Slips From 18-Month High Ahead of Key Inflation Data

The U.S. dollar weakened slightly on Wednesday, retreating further from an 18-month high as investors awaited crucial U.S. inflation data that could influence the Federal Reserve’s next interest rate decision.

The US Dollar Index, which tracks the greenback against six major currencies, declined 0.1% to 102.09. The drop followed Tuesday’s 0.4% loss after the index reached its highest level since April 2025 earlier this week.

Currency markets remained focused on the September U.S. Consumer Price Index (CPI) report, scheduled for release later Wednesday. Economists forecast annual headline inflation to rise to 3.6%, compared with 3.4% in August.

A stronger-than-expected core inflation reading could increase expectations of another Federal Reserve interest rate hike at its October 27-28 policy meeting.

Markets currently assign approximately a 22% probability to a 25-basis-point increase, while the likelihood of unchanged rates stands near 78%.

The Fed raised interest rates by 25 basis points in September, bringing its benchmark range to 3.75%-4.00%. Policymakers also signaled further tightening, with 16 of 18 officials anticipating at least one additional increase this year.

Meanwhile, currency futures suggest an 85% probability of another rate hike by December.

Across Asian currency markets, the Japanese yen strengthened modestly against the dollar, while the Australian dollar gained 0.3%. The Indian rupee remained relatively stable following its sharp recovery from near-record lows, supported by foreign exchange measures introduced by the Reserve Bank of India.

China's latest economic figures also attracted investor attention. Consumer inflation increased to 0.9% annually in September, below expectations of 1.0%, while producer prices climbed 5.0%, marking their fastest growth since June 2022.

Chinese exports surged 36.3% year-on-year, exceeding forecasts of 25.5%, while imports advanced 31.0%. The country's trade surplus expanded to $133.53 billion, highlighting resilient international trade despite concerns about domestic consumption.

In Singapore, the local currency weakened after the Monetary Authority of Singapore unexpectedly maintained its existing monetary policy settings.

Singapore's third-quarter GDP expanded 5.4% annually, surpassing expectations of 5.1% but slowing from the previous quarter's 6.2% growth.

Strong demand for artificial intelligence technologies continued supporting Singapore's technology-driven industries, providing momentum despite broader global economic uncertainty.