The dollar nursed hefty losses in Asia on Wednesday after the Trump administration accused Germany and Japan of devaluing their currencies to gain a trade advantage, fuelling a risk-off mood that subdued stocks while benefiting bonds.
The U.S. currency suffered its worst January in three decades after President Donald Trump complained that every "other country lives on devaluation."
Just hours earlier his top trade adviser said Germany was using a "grossly undervalued" euro to exploit its trading partners and that a proposed trade agreement between the United States and Europe was dead.
"Suspicions that Washington may increasingly focus on the value of the dollar were catapulted into the limelight," ANZ analysts said in a note.
"The early policy implication is that dollar competitiveness could have a prominent role to play in Trump's 'America First' agenda."
That left the dollar huddled at 112.70 yen JPY= in Asia on Wednesday, having fallen as much as 1.5 percent overnight to lows around 112.08.
The euro was firm at $1.0800 EUR=, having been as high as $1.0812 and a long way from Monday's trough of $1.0617.
Against a basket of currencies, the dollar .DXY matched a low from Dec. 8 at 99.430 to end January with a loss of 2.6 percent.
The jump in the yen was likely to pressure stocks of Japanese exporters and Nikkei futures NKc1 pointed to a softer start in Tokyo.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was little changed with China still on holiday.
Investors' hopes for a fiscal boost to the world's largest economy under Trump have been tempered by controversial and protectionist policies that have seen him suspend travel to the United States from seven Muslim-majority countries.
The policy uncertainty only added to expectations the U.S. Federal Reserve will keep interest rates steady when it concludes a two-day meeting later Wednesday.
The setback for Wall Street has been limited so far.
While the S&P 500 fell on Tuesday for a fourth consecutive session, it still ended higher for the month.
The Dow .DJI dipped 0.54 percent, while the S&P 500 .SPX lost 0.09 percent and the Nasdaq .IXIC 0.02 percent.
Apple (AAPL.O) shares also jumped 3.3 percent as sales of iPhones beat expectations, helping turn Nasdaq e-mini futures NQc1 positive after the bell.
Safe-haven bonds benefited from the air of unease over Trump's policies and yields on 10-year Treasury debt US10YT=RR eased to 2.45 percent from 2.48 percent early in the week.
The retreat in the dollar also boosted a range of commodities, with copper touching a two-month high CMCU3.
Brent crude oil LCOc1 for April was quoted 17 cents firmer at $55.49, while U.S. crude CLc1 eased 4 cents to $52.77.