The safety of dollars and yen was sought on Monday, keeping the greenback near its strongest in months, as the spread of the delta coronavirus variant shook investors' confidence in growth and left many nervous about England's reopening.
The risk sensitive Aussie came under the most pressure among major currencies in the Asia session, dropping to a seven-month low of $0.7373 and sliding for a fifth day in a row on the yen to find its lowest in five months.
The yen was last up 0.1% at 109.25 per dollar and close to its strongest since April at 129.78 per euro. The euro sat at $1.1805, near last week's three-month low of $1.1772.
The dollar rose to stand at its strongest this year on the Thai baht, the Singapore dollar and the Malaysian ringgit as stocks fell and bonds rallied with the jittery mood on what has been dubbed "Freedom Day" in England.
"The market is really trading on the uncertainty in the air around COVID," National Australia Bank (OTC:NABZY) senior currency strategist Rodrigo Catril said on the bank's morning podcast.
Daily infections have been surging from the United States and Europe to Asia and the global seven-day average of new cases each day is over half a million for the first time since May.
The dollar index firmed marginally to 92.717, leaving it pretty close to last week's three-month high of 92.832. The Canadian dollar fell to its lowest since April, and through its 200-day moving average, with a drop in oil prices.
Traders are now holding their breath as Monday marks the end of most social curbs in England and a shift from suppression to trusting vaccination to prevent serious illness.
Sterling was perched at $1.3754, its lowest in more than a week, as the sun rose in London with epidemiologists sceptical and the prime minister, finance minister and health minister themselves isolating as cases spread.
Boris Johnson's government is betting fully vaccinated people are less likely to get seriously ill with COVID-19.
"The removal of restrictions means people will catch the virus," Commonwealth Bank of Australia (OTC:CMWAY) strategist Carol Kong said in a note.
"The question is how many and how sick," she said, with markets likely to closely watch critical care capacity for any indication that a bed shortage could prompt new lockdowns.
"A surge in infections could (also) foster an emergence of new variants," she added. "If new variants are resistant to existing vaccines and spread to the rest of the world, lockdowns could remain in place for longer and in turn hold back the global economic recovery. All eyes will be on England."
The week ahead's data calendar is fairly bare until Friday, when global purchasing managers' index figures are published, with policy and virus response set to be in focus in the meantime as lockdowns expand in Asia.
There is an outside chance China's benchmark loan prime rate is lowered on Tuesday and the European Central Bank (ECB), which meets on Thursday, has flagged a guidance tweak to reflect its more relaxed stance on inflation overshooting.
"Decisive ECB policy action to back up the new policy framework could trigger a fresh euro sell off at a time when other major central banks are moving closer to raising rates," said analysts at MUFG Bank.
"A failure to act would provide some relief for the euro."
Cryptocurrencies were steady through the Asia session but remained pinned just above strong support levels. Bitcoin was last flat at $31,702 and ether steady at $1,897.