FOREX-Dollar sold broadly as bearish mood weighs on rates outlook

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
* Dollar continues to suffer on Fed policy shift
* Aussie holds gains after RBA meeting
* Japan's leadership race in view

By Stanley White
TOKYO, Sept 1 (Reuters) - The dollar fell toward multi-year
lows against most major currencies on Tuesday as investors
stepped up bets the Federal Reserve's new policy framework meant
U.S. rates would stay lower than rates in other countries.
The Australian dollar held around a two-year high against
the greenback after the Reserve Bank of Australia (RBA) kept
policy unchanged and expanded its cheap funding for banks.
The yuan was another strong performer, brushing off concerns
about diplomatic tension over Taiwan to surge to its strongest
in more than a year against the greenback.
The U.S. data calendar this week is full of important
releases on manufacturing, durable goods, and employment, but
positive results are unlikely to halt the dollar's decline due
to strong expectations that rates will remain extremely low.
"The dollar is weak not only against G10 currencies but also
against emerging market currencies," said Minori Uchida, head of
global market research at MUFG Bank in Tokyo.
"This shows the dollar is in a downtrend that will last for
some time. Low rates and an excess supply of dollars are driving
this move."
Against the euro EUR=D3 , the dollar fell to $1.1997 on
Tuesday to reach its lowest since May 2018.
The British pound GBP=D3 rose to $1.3413, the highest
since December last year, after Japan's foreign minister said a
broad agreement on a Japan-UK trade deal is close.
The dollar was quoted at 0.9006 Swiss francs CHF=EBS , just
a shade above the lowest in more than five years.
The greenback eased slightly to 105.75 yen JPY=D3 .
The Fed's historic switch last week to focusing more on
average inflation and higher employment means it has leeway to
keep benchmark rates lower for longer, which has encouraged
dollar bears to sell the currency. A decline in long-term Treasury yields on Monday highlights
the strong headwinds facing the dollar.
Data due later on Tuesday is expected to show that U.S.
manufacturing activity continued to expand in August, but this
may not be enough to change the negative sentiment surrounding
the dollar, analysts said.
Against a basket of six major currencies, the dollar index
=USD slid on Tuesday to a two-year low at 91.775.
The yen was in focus as investors place bets on who will
become Japan's next prime minister.
The largest faction in the ruling Liberal Democratic Party
has thrown its support behind Yoshihide Suga, who currently
serves as chief cabinet secretary. L4N2FX52L
Suga is a close ally of Abe and is likely to continue many
of Abe's policies if he becomes the new prime minister.
The Australian dollar AUD=D3 rose to $0.7413, close to its
highest since August 2018.
The RBA left its cash rate at a record low of 0.25% on
Tuesday, but surprised by expanding a programme of cheap funding
for banks and extending it out to the middle of 2021.
The New Zealand dollar NZD=D3 held steady at $0.6767, near
its strongest in two years.
The onshore yuan CNY=CFXS surged to 6.8181, the highest in
more than a year.
The dollar also fell broadly against other emerging Asian
currencies, further underlining the greenback's woes.
The yuan brushed aside increasing tension between the United
States and China in the run up to this year's U.S. presidential
election in November.
The United States said on Monday it was establishing a new
bilateral economic dialogue with Taiwan in a move that is sure
to anger Beijing, because China claims Taiwan as its own
territory.