The Australian and New Zealand dollars rallied on Tuesday

The Japanese yen stayed in a narrow range on Tuesday while politicians tried to choose a new premier. After Prime Minister Shinzo Abe’s shock resignation last week, there has been turmoil in Japan.

On the other hand, several off-risk currencies strengthened. The New Zealand dollar traded at $0.6740, near its strongest point in two years. Meanwhile, the Australian dollar stood near a two-year high against the greenback.

Traders were looking out for the Reserve Bank of Australia policy meeting. The Aussie stayed at $0.7381 as they didn’t expect the RBA to make any major changes at a policy meeting.

The country still struggles with a recent increase in Covid-19 cases. So, investors want to see how central bankers assess the economic outlook before making major moves.

How did the U.S. dollar fare?

On Tuesday, the dollar traded at $1.1938 against the euro in Asia, close to its lowest since May 2018. It stood at 0.9040 Swiss francs, barely above the lowest point in more than five years. The Sterling bought $1.3365, which is near its strongest level in almost a year. However, the dollar was steady at 105.94 Japanese yen.

The dollar index fell to a two-year low at 91.989 against a basket of six major currencies on Monday. And it collapsed again near multi-year lows on Tuesday.

The dollar is weak both against G10 currencies and emerging market currencies – stated Minori Uchida, the head of global market research at MUFG Bank in Tokyo. He added that this shows the greenback is on a downtrend that will last for some time.

Meanwhile, investors traded bets about the Fed’s new policy framework, arguing whether U.S. rates will stay lower longer than other countries.

The U.S. data calendar is full of important releases this week. But analysts think that positive results may not halt the greenback’s decline due to strong expectations that rates will remain extremely low.