The dollar fell again at the start of Wednesday's Asian session on Wednesday, starting its third consecutive session under pressure as investors favour riskier currencies and asset classes.
The New Zealand dollar gained 0.8 per cent on Tuesday, its best day since October, recovering from a near-year low to last trade at $0.6757, while the pound added 0.46 per cent - its best day in a month - in last trade at $1.3267.
With the dollar also up 0.44% against the safe haven yen, Tuesday's currency movement was in line with rising oil prices and a 1.6% increase in the MSCI global equities index.
As a result, the dollar index, which measures the currency against major peers, was last at 96.441, up from 96.994 last week when it tested a 16-month high.
Experts at Vietnam's Exness Là Gì learned that market participants struggled to point to a clear reason for the "risk-off" mood, saying markets were struggling to assess the implications of the COVID-19 Omicron option leading to unwarranted volatility.
Stocks fell sharply on Monday, while the dollar index rose 0.7% on Friday.
While the weeks either side of Christmas are generally low on volatility for currencies and other asset classes, ING analysts said, "This year some seasonal trends will be mixed with the Omicron option threatening to introduce new restrictions, and markets are still processing a week full of key central bank decisions."
Last week the UK became the first G7 economy to raise interest rates since the pandemic began, with the US Federal Reserve also signalling plans to tighten in 2022, but the European Central Bank only slightly restraining stimulus.
Omicron infections are multiplying in Europe, the US and Asia, forcing countries around the world to consider new travel restrictions and re-impose quarantine periods for arriving visitors.
But Bloomberg's report that the US Food and Drug Administration is going to allow COVID-19 treatment pills from Pfizer Inc and Merck as early as Wednesday may have lifted the mood.
The euro last held at $1.1289 since Wednesday, and this will be its third consecutive session of gains.
As for emerging market currencies, traders are preparing for another day of volatility in the Turkish lira, which closed Tuesday down 8.6% and up 18.5%.
Bitcoin mostly held steady below $49,000 after rising 4% on Tuesday. Ether, the world's second-largest cryptocurrency, also rose this week and was last seen just above $4,000.