The dollar dipped to a three-week low against the Japanese yen on Tuesday as concerns about how quickly the Trump administration can implement pro-growth policies pushed stocks lower and kindled safe-haven demand for the Japanese currency.
The greenback has been under pressure after comments from the U.S. Federal Reserve last week disappointed dollar bulls. On Tuesday, the dollar index, which measures the greenback against a basket of six major currencies, dipped below the 100 level for the first time since Feb. 7.
The dollar was down 0.65 percent at 99.76 yen.
"The current and ongoing breakdown in the U.S. dollar is representative, driving some short-term and nascent deleveraging of legacy 'reflation' trades, with DXY through the psychological 100 level," said Charlie McElligott, managing director and head of U.S. cross-asset strategy at RBC Capital Markets.
The S&P 500 was down 1 percent and on pace for its largest daily percent loss in more then five months and U.S. Treasury yields fell to three-week lows.
"There is certainly some interplay between all these factors that is supporting the yen," said Erik Nelson, a currency analyst at Wells Fargo in New York.
The upcoming French elections helped the euro and weighed on the dollar after centrist Emmanuel Macron's performance in a television debate boosted a view he would win the presidential race over the far-right's Marine Le Pen.
Bullish bets on the dollar spurred by Donald Trump's U.S. presidential win and his pledge on tax cuts, deregulation and infrastructure spending last November have been fully unwound, Bank of America Merrill Lynch currency strategist Myria Kyriacou said in a note.
The euro rose to its highest since Feb 2, and was last up 0.62 percent to $1.0806.
The prospect of anti-European Union, far-right candidate Le Pen delivering a surprise election win has rattled French bond markets this year and is a key source of political uncertainty for the euro.
"Any news between now and the French election next month that suggests fading risk of a Le Pen victory would probably be supportive of the euro," said Omer Esiner, chief market analyst, at Commonwealth Foreign Exchange in Washington.
Sterling jumped 1.02 percent to its highest level in three weeks on Tuesday, after data showed British inflation in February above the Bank of England's 2 percent target for the first time since the end of 2013. This was seen as boosting chances for a rate hike from the BoE.