Dollar index slips for third day as tech stock rout outweighs hawkish Fed
The US Dollar Index fell for a third consecutive day to around 101.65 as weak technology earnings drove money into government bonds, pulling Treasury yields lower even as the Federal Reserve held a hawkish tone.
The 10-year Treasury yield eased to near 4.91%, down from a 2002-era high of 5.36% earlier in October, as investors rotated out of equities and into bonds. Next week’s US midterm elections have added to the cautious tone in markets.
The move followed a rough stretch for major technology names. Alphabet shares dropped 12.6%, Amazon fell nearly 7% in premarket trading, and Intel sank more than 25% after issuing guidance that fell short of expectations. The results have reignited questions over whether heavy spending on artificial intelligence is paying off.
Because the US sits at the centre of that AI investment wave, any pullback in corporate spending plans is seen as a risk to growth, even though third-quarter gross domestic product (GDP) accelerated to an annualised 3.4%, up from 2.2% in the prior quarter. Strategists at Brown Brothers Harriman said the tech sell-off could keep pressure on the dollar near term, potentially testing support around 101.00 on the index, while adding that strong activity and inflation keep the Fed’s bias hawkish.
The Federal Open Market Committee voted 10-2 on Wednesday to hold rates at 3.75%-4.00%, with two officials preferring a 25-basis-point increase. Fed Chair Kevin Warsh said he remains committed to price stability and would not describe financial conditions as tight.
September PCE inflation data released Thursday showed headline prices up 0.5% month-on-month and 3.6% year-on-year, with core inflation at 0.3% and 3.1% respectively, both above the Fed’s 2% target. Markets now price roughly a 75% chance of a December rate hike, according to the CME FedWatch Tool.
Why it matters: A weaker dollar index alongside falling Treasury yields signals shifting rate expectations tied to equity market stress rather than monetary policy alone. Persistent inflation and a still-hawkish Fed could limit how far the dollar falls, with implications for EUR/USD, USD/JPY and broader risk sentiment in stocks and indices.
Source: FXStreet