US Dollar Under Pressure; High Inflation Fails to Provide Support!

The US Dollar Index (DXY) weakened again during trading on Friday (October 30, 2026), moving toward the 101.50 level and extending its decline for the third consecutive day. This weakness coincided with a drop in US government bond yields, driven by a massive sell-off in technology and artificial intelligence (AI) stocks. Investors shifted capital into government bonds—perceived as a safer asset—which pushed bond prices higher and yields lower. This development removed a key pillar of support for the dollar, even as the outlook for US monetary policy remains tilted toward a restrictive stance.

Pressure on the tech sector intensified following earnings reports from major companies, including Alphabet, Amazon, and Intel, which raised concerns regarding the scale of investment in AI. Investors are questioning whether the heavy spending on data centers, chip development, and tech infrastructure will yield commensurate returns. This sentiment triggered a flight to safety across global equity markets, simultaneously boosting demand for US government debt. The resulting decline in bond yields diminished the dollar’s ​​appeal relative to other major currencies.

Meanwhile, US inflation data continues to point to persistent price pressures. The Personal Consumption Expenditures (PCE) price index rose by 0.5% month-on-month in September—the largest increase since March. On an annual basis, PCE inflation reached 3.6%, while core PCE inflation stood at 3.1%. Although the Federal Reserve (the Fed) kept interest rates unchanged at its October meeting, market participants are pricing in a roughly 75% probability of a rate hike in December. This suggests that the dollar’s ​​recent weakness does not necessarily signal a shift toward a more dovish Fed policy.

Looking ahead, the trajectory of the US dollar will largely depend on the interplay between falling bond yields and expectations for further monetary tightening. If pressure on technology stocks continues to drive investors toward bonds, the DXY (US Dollar Index) could face further weakness. Conversely, persistently high inflation might push yields back up and strengthen the dollar, should the market become increasingly convinced that the Federal Reserve will raise interest rates in December. The current weakness in the DXY reflects shifts in investment flows and a decline in yields rather than an easing of concerns regarding inflation. Consequently, the trajectory of the dollar remains susceptible to change, contingent upon developments in the bond market and expectations surrounding US interest rates.