The dollar had its worst week in more than a month. The euro rose for the first time in five weeks.

The dollar fell at its fastest pace in more than a month over the course of the week, ending a four-week winning streak. The U.S. currency fell amid declining expectations among traders regarding an interest rate hike in October: they received no signals from Federal Reserve Chairman Kevin Warsh regarding future monetary policy.

The Bloomberg Dollar Spot Index was down 0.4% at one point on October 16 and ended the day down 0.2%. It posted its sharpest weekly decline since September 4, the agency reported. The U.S. dollar weakened against most major currencies, while the euro strengthened, breaking a five-week losing streak.

At meetings organized by the International Monetary Fund in Bangkok, Kevin Warsh declined to comment on monetary policy or the state of the U.S. economy. This was his last opportunity to express his views before the Fed enters a communication blackout period ahead of its October meeting, according to Bloomberg.

"Warsh gave no clues. Although this was to be expected at this stage, the market is interpreting his silence as a signal that the Fed is unlikely to raise rates at its October meeting,” said CIBC Capital Markets strategist Noah Buffam, as quoted by Bloomberg. An additional factor putting pressure on the dollar is the growing risks surrounding investments in artificial intelligence, which have supported U.S. economic growth in recent years, Buffam noted.

The FedWatch tool shows that the probability of a rate hike at the October meeting is currently estimated at just 17.2%. A month ago, it was nearly 50%.

Earlier this week, the dollar strengthened following the release of U.S. inflation data that came in higher than expected. This reinforced speculation that the Fed might raise rates again, Bloomberg notes. Prior to the September meeting—at which the central bank raised rates for the first time in three years—Warsh had been sending strong signals to the market about the need to keep inflation in check.

The Fed’s mixed signals are heightening uncertainty about the future path of interest rates, according to Spectra Markets President Brent Donnelly, as quoted by Bloomberg. “[The Fed] is actively bringing ‘doves’ onto the scene, and an October rate hike is no longer priced in—despite this week’s impressive monthly data,” Donnelly explained. He was referring to inflation and retail sales figures that exceeded forecasts, Bloomberg noted.

This article was AI-translated and verified by a human editor