The rate banks charge each other to borrow dollars for three months fell by the most in nearly four months on Tuesday, following a broad pullback in benchmark bond yields the day before on worry over U.S. President Donald Trump's tough stance on trade.
A month ago, the dollar and stock markets were riding high as investors bet that the Trump administration, together with the Republican-controlled Congress, would usher in an era of lower taxes, more government spending and looser regulations.
Worries over Donald Trump's economic policies and the potential for U.S. policy errors rose sharply this month, according to a survey of fund managers released on Tuesday, prompting them to hold more cash even though they expect growth and inflation to rise further.
Talk of Britain drastically reworking trade ties with the European Union after Brexit sent the pound tumbling to two-month lows on Monday, as signals that U.S. interest rates could rise three times this year lifted the dollar.
Bank of Japan Governor Haruhiko Kuroda offered an upbeat view of the economy but sought to douse market talk the central bank may soon consider raising interest rates, vowing instead to keep policy loose to achieve the BoJ's 2 % inflation goal.
Risk appetite remains strong at the start of the new week, aided by a softening in tone of some of the more controversial campaign promises as Donald Trump, the candidate, continues to morph into President-elect Donald Trump.