By Lisa Twaronite, MarketWatch TOKYO (MarketWatch) -- The dollar continued to slump against major rivals Tuesday, on waning expectations that the U.S. Federal Reserve will be hiking interest rates soon. "We continue to believe that markets are pricing too aggressive a profile of Fed rate hikes," said Tohru Sasaki, chief FX strategist Japan at JP Morgan Securities in Tokyo. The benchmark 10-year U.S. Treasury yield has a "strong negative correlation" with the Japanese yen, Sasaki said in a research note. That means that if the market expectations of Fed rate hikes were to weaken and 10-year yields start falling toward the bottom of their six-month trading range, the yen is likely to appreciate as 10-year yields fall, he said. The dollar index (DXY 77.26, -0.27, -0.35%) , which tracks the U.S. currency against a trade-weighted basket of six major rivals, traded at 77.261, down from 77.502 in North American trading late Monday. The dollar fell to 91.86 yen, down from 92.54 yen late Monday. The euro rose to $1.4451, from $1.4411 late Monday, and the British pound bought $1.6103, up from $1.6099. On Monday, the dollar fell against major rivals after upbeat economic data from the U.K. and China helped offset a strong U.S. report on manufacturing, just as Federal Reserve officials signaled interest rates would stay low for the foreseeable future. See Monday's Currencies report.

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