The U.S. dollar headed for its worst start to a year since 2008 on Tuesday while world stock losses, already the biggest in six weeks, grew after widespread protests against President Donald Trump's stringent curbs on to the United States.
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.
Thousands took to the streets of major U.S. cities to oppose the travel ban, which also halts refugee arrivals, while marches in Britain added to pressure on Prime Minister Theresa May to cancel a planned state visit by Trump.
A stream of U.S. policymakers and business executives have also slammed Trump's stance.
The dollar edged down against a basket of six major currencies .DXY, on track for a 1.9 percent fall this month - its worst start to the year since the financial crisis.
MSCI's gauge of the world's 46 stock markets .MIWD00000PUS lost a further 0.1 percent on Tuesday, adding to a 0.6 percent fall on Monday which was its largest loss in a month and a half.
"His actions over the last few days is another reminder that there were two sides to his campaign and Trump is just as adamant to follow through on those measures that will likely weigh on market sentiment in the coming months," said Craig Erlam, senior market analyst at OANDA.
Euro zone government bond yields edged higher as better-than-expected French and Spanish January inflation data set the tone for a bloc-wide reading due at 1000 GMT.
Economists polled by Reuters expect an annualized 1.6 percent rise in consumer prices for the euro zone as a whole. Preliminary economic growth data also due at 1000 GMT is expected to come in at 1.7 percent.
European bourses clawed back some ground after big losses on Monday after strong results from the likes of British online supermarket Ocado (OCDO.L).
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.6 percent while Japan's Nikkei .N225 dropped 1.7 percent, its biggest fall in almost three months.
On Monday, the U.S. S&P 500 Index .SPX fell 0.6 percent, its biggest fall in a month, though it remained well above levels seen before the Nov. 8 presidential election.
Most stock markets remained up on the month, supported by signs of accelerating momentum in the global economy and lingering hopes of large fiscal stimulus from Trump.
MSCI's ex-Japan Asian shares index was up 5.7 percent this month while its index of world markets was up 2.5 percent. They were also higher than their levels before the U.S. election.
But the mood has soured in recent sessions, especially on Monday when Trump fired the federal government's top lawyer after she took the extraordinarily rare step of defying the White House over the travel ban.
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Against the yen, the dollar fell a further 0.3 percent to 113.49 yen JPY=. It is down 3.1 percent so far this month, after three straight months of sizable gains.
The Japanese currency showed no reaction after the Bank of Japan kept policy on hold, as expected. A string of recent data has suggested the economy is slowly regaining traction.
The euro EUR= edged up to $1.0725, consolidating after a rebound this month from a 14-year low of $1.0340 set on Jan. 3.
In a possible sign of increased anxiety among , the safe-haven Swiss franc strengthened to a seven-month high of 1.0637 franc per euro EURCHF= on Monday.
Elevated uncertainty about Trump's policies, including a lack of detail so far on his plans for tax cuts and fiscal spending, offset optimism on the U.S. economy.
Data on Monday showed U.S. consumer spending accelerated in December while inflation showed some signs of picking up last month.
The core PCE price index, the Federal Reserve's preferred inflation measure, rose 1.7 percent on a year-on-year basis after a similar gain in November.
"We've seen a jump in U.S. economic sentiment after Trump's victory. But the improvement in hard economic data remains moderate," said Haruka Kazama, senior economist at Mizuho Research Institute.
"And if Trump takes more steps to limit permits for immigrants, that would surely boost inflation as the U.S. is now near a full employment."
The Federal Reserve, which starts its two-day policy meeting on Tuesday, is widely expected to keep interest rates unchanged as it awaits greater clarity on Trump's economic policies.
Oil prices dipped as rising U.S. drilling activity offset efforts by OPEC and other producers to cut output in a move to prop up the market.
Brent crude futures LCOc1, the international benchmark for oil prices, were trading at $55.14 per barrel, down 0.2 percent from Monday's settlement price.
(Additional reporting by Hideyuki Sano in Tokyo; Editing by Catherine Evans)