By Joseph Adinolfi, MarketWatch

Aussie outperforms after RBA shift

The dollar weakened against commodity-sensitive and emerging-markets currencies Tuesday as oil prices rebounded and China's stock market recorded a second day of gains, increasing investors' tolerance for risky assets.

Meanwhile, the buck weakened slightly against its major rivals, but remained well within a narrow range that has held since the beginning of last week.

But volatility will likely return Wednesday, as several key U.S. data releases -- the ADP employment report, U.S. international trade data for June and the ISM non-manufacturing index -- are on tap, said Boris Schlossberg, managing director of FX strategy at BK Asset Management, in a note to clients.

The euro strengthened to $1.0970, from $1.0954 late Monday in New York; the dollar traded at 123.99 yen, little changed from its late-Monday level; and the pound edged higher to $1.5618, from $1.5586.

The Australian dollar was the best-performing currency against the dollar Tuesday, strengthening 1.7% to 74 cents, its highest level in about two weeks. It traded at 72.73 cents late Monday in New York.

Policy makers from the Reserve Bank of Australia adjusted the language in their latest policy statement, released early Tuesday, to suggest that the Aussie has reached what they believe to be a fair value against the dollar, said Jane Foley, a senior currency strategist at Rabobank.

In its statement Tuesday, the central bank said the Aussie "...is adjusting to the significant declines in key commodity prices." Past statements indicated that further depreciation was both likely and necessary.

"For the first time in a long time, the RBA isn't complaining about Aussie dollar strength," Foley said.

Elsewhere, the Canadian dollar , Mexican peso and Brazilian real all traded higher against the dollar.

The ICE U.S. Dollar Index , a measure of the dollar's strength against a basket of six rival currencies, was down 0.2% to 97.3170.

Oil prices crept higher Tuesday (http://www.marketwatch.com/story/oil-prices-creep-higher-after-prior-days-selloff-2015-08-04) after Brent crude , the international benchmark, settled below $50 a barrel on Monday for the first time since January.

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