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On Monday, the U.S. dollar traded down to a three-year low against a basket of six other major currencies following the rally of the euro in the back of market hopes of a monetary stimulus possibly being cut down by the European Central Bank policymakers.

The U.S. dollar index which measures the greenback against other major currencies previously traded to its lowest intraday in the past three years as the Sterling and the euro rallied further from having previously traded higher in the past two weeks following a series of European political developments being announced.

The dollar index has recently declined by 1.4% year to date as the euro rallied further by another 0.2% recently against the U.S. dollar to $1.2208 from previously hitting a three-year high on the announcement from German Chancellor Angela Merkel regarding a coalition deal between the Social Democrats and her conservative bloc.

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In Asia, the dollar index was also 0.2% higher to 90.773 during the trading session on Monday. Most currencies in the Asia Pacific traded higher against the US dollar during the same trading session as the dollar index hovered down to a three-year low. Equities also traded higher in Asia following a strong Wall Street performance during last Friday’s session. The MSCI Asia Pacific index outside Japan also gained 0.3% during the early trading session crossing the 2007 market 591.50 to trade at 591.66.

The Japanese yen gained 0.3% to 110.64 against the dollar. The Australian dollar also traded to $0.7953 against the greenback as well as the New Zealand dollar trading 0.3% higher to $0.7269. The following gains followed shortly after the dollar index slipped 0.3% to 90.700

The British pound which was 0.1% higher against the U.S. dollar to $1.3739 following reports of a soft Brexit deal being prepared to be back on by Dutch and Spanish finance ministers.

While analysts commented to how the recent rally of the euro is overdone, some have also predicted that this could delay the normalization of the European Central Bank as it is currently conducting verbal tightening which would lead to them not needing to move on interest rates. A faster monetary tightening outside the United States would also cut the divergence between other central banks and the Federal Reserve as a faster rate weighs in on the greenback.

On the other hand, the Bank of Japan Governor Haruhiko Kuroda repeated the central bank’s resolve in maintaining its large stimulus program until it achieves a two percent stable inflation as the economy of the country is expected to expand moderately continuously.

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