The US dollar saw its biggest drop in almost a month on Monday as a bashing for oil prices on doubts about an OPEC output cut this week left investors reversing "Trumpflation" trades that have gripped markets since the US election.
Crude prices and Europe's main stock markets were down over one per cent in early European trading as Italian shares also took a fresh tumble ahead of its referendum on constitutional change this Sunday.
Oil's autumn added to a 3.5 per cent plunge on Friday when it emerged that Saudi Arabia would not join talks with non-OPEC producers on potential supply cuts.
With oil so vital for global costs it was rapidly cooling bets on a near-term inflation jump and tempering expectations for rises in US interest rates that have been running up fast in recent weeks.
The dollar sank as much as 1.6 per cent against the yen, going as low as 111.355 yen before recovering slightly to 112.00.
That was still its biggest fall against its Japanese rival since October 7 and against a basket of top world currencies it was the greenback's worst day since November.
"It's a bit of a pull back in the dollar," said Societe Generale strategist Alvin Tan. "The fall in oil is pushing back US bond yields and that is leading the consolidation in the dollar.. there is more scepticism about an (OPEC) output cut now."
The moves hoisted the euro to an 11-day high $US1.0686 ($A1.4300) as it got a lift too from the election of Francois Fillon as the centre-right candidate in next year's French presidential election.
The reformist former prime minister is now favourite to become president, with a flash opinion poll showing he would easily beat National Front leader Marine Le Pen in a run-off second round. Markets worry the far-right Le Pen, who has promised a referendum on membership of the European Union if she wins, would threaten the future of the currency bloc.
Italy, which has been plagued by political concerns ahead of its referendum on constitutional reform, remained a more obvious concern meanwhile.
Having lost more than half their value over the last year, Italian banking stocks fell three per cent to their lowest in almost two months as Italian government bonds also underperformed the wider rally in fixed income.
As the dollar wilted in the currency markets, gold bounced back to $US1,192.0 ($A1,595.1) per ounce from Friday's low $US1,171.5 ($A1,567.7), which was its lowest level since early February.
Industrial metals also remained red hot on hopes of strong demand for property and infrastructure investment in China and the United States.
Chinese steel futures jumped over six per cent, while iron ore futures also gained about six per cent and zinc, used to galvanise steel, powered to a nine-year high on the London Metal Exchange.
Asian shares rose 0.4 per cent overnight, led by gains in Hong Kong and Taiwan though Japan's Nikkei, which has been performing even better than a record high Wall Street in recent weeks thanks to the yen's fall, ended down 0.1 per cent.
"It will be scary to think markets may fully reverse their moves since the elections, changing their mind that Trump's policy may not be so good after all," said Bart Wakabayashi, head of Hong Kong FX sales at State Street Global Markets.
China's blue-chip CSI300 index rose 0.4 per cent, to 3,535.08 points, while the Shanghai Composite Index gained 0.5 per cent to 3,277.00 points, both hitting their highest levels since early January.
In the bond markets, the yield on 10-year US Treasuries dropped almost five basis points to 2.323 per cent, off its 16-month high of 2.417 per cent touched last week. Europe's benchmark, German Bunds, saw their equivalent yield drop three basis points.
US stock futures slipped 0.2 per cent ahead of US trading. Wall Street's four main indexes all hit record highs last week, a feat last achieved in 1999.