The dollar stumbled against the yen, euro and gold, with analysts pointing to U.S. President Donald Trump's failure to usher a Republican health-care reform bill through a seemingly friendly Congress.
Andy Brenner, head of international fixed income securities at National Alliance Securities, said in a note late Sunday U.S. time that this was markets' first chance to react to the health-care bill's failure.
"We sense the choppiness could lead to some very chunky swings," he said.
The , which measures the greenback against a basket of currencies, tumbled as low as 99.263 in early Asia trade on Monday, from as high as 100 on Friday.
The was fetching as much as $1.0849 early Monday, with the common currency marking its highest levels since early December. The yen also surged, with the dollar fetching as few as 110.23 yen, the greenback's lowest level since late November.
Gold also climbed, rising as high as $1,257.97 an ounce, the highest since late February and stocks around Asia tumbled.
That followed Trump lashing out at his party's conservative wing on Sunday after the stinging defeat of a Republican health care plan he backed.
Although the legislation was largely authored by House Speaker Paul Ryan, representatives from the right wing of the GOP, including the House Freedom Caucus, vigorously opposed the bill.
Vishnu Varathan, a senior economist at Mizuho Bank in Singapore, also pointed to the health-care bill's train wreck as driving the market selloff.
"It's just follow through on disappointment on the health-care bill and to doubts on whether Trump can push through his other policies," such as infrastructure and tax reforms, Varathan said.
He noted that the market sentiment shift was particularly pronounced in plays on Trump's planned agenda, such as iron ore and the Australian dollar falling on diminished expectations for infrastructure spending.
As the Trump-related inflation expectations come off, the U.S. Treasury yield was also falling, he noted.
The 10-year U.S. Treasury yield fell as low as 2.3657 percent in early Asia trade Monday, down from as high as 2.4380 percent on Friday. Bond yields move inversely to prices and falling Treasury yields typically indicate either diminishing inflation expectations or a risk-off mentality.
Others were also concerned that the market's rally since Trump's election was set to come off.
"The Trump rally is in danger because as a result of what we saw with the health-care bill, a lot of the optimism around Trump – which I think was unfounded – I think there's a risk of it unfolding," Jeremy O'Friel, managing director at Belmont Investments, told CNBC's "Squawk Box" on Monday. "He was talking about 4 percent growth rates. I don't know where he's going to get 4 percent growth rates from. We haven't done that for 15 years."
Others pointed to concerns that larger risks might emerge in the wake of the health-care fiasco.
Eswar Prasad, a professor at Cornell University and former chief of the IMF's China division, told CNBC's "The Rundown" on Monday that "Trump may not be able to broker deals as effectively as he could in business so it's going to be rough sledding for all of his policy priorities."
In addition, Prasad pointed to concerns about how aggressively Trump might turn to other policy plans, spurring greater global economic risks.
"Government officials in China, before the vote took place, were laser focused on the health care reform vote. They really wanted it to pass," Prasad noted. "The sense was that if Mr. Trump didn't get that victory, he might be looking to some other way to placate his base and getting tough on trade, especially with China, is a very easy way to do that so there was some nervousness about that."
Prasad said the temptation for Trump to play a trade-conflict card would increase.
"That could lead to a tit-for-tat war that neither side wants but could very well get started," he said.
—Javier David contributed to this article.
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1