The US dollar scaled two-year peaks, as a wave of risk aversion hit global markets, while the Chinese yuan posted its largest three-day losing streak in nearly four years on growing worries of an economic slowdown in the world's second-largest economy.

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With the war in Ukraine entering the third month and growing concerns of a China-wide COVID-19 outbreak sparking a rout in Chinese stocks, investors dumped currency market darlings like the Australian dollar and the offshore Chinese yuan.

Against a basket of its rivals, the dollar rose to 101.86, a level it last tested in March 2020. It was last at 101.76, up 0.7 percent, its largest daily percentage gain since March 11.

"The dollar is increasingly in vogue given the dimmer outlook for the world economy, coupled with the Federal Reserve's ever assertive rhetoric about big rate hikes to help it tame inflation," said Joe Manimbo, senior market analyst, at Western Union Business Solutions, in Washington.

"China's struggle to contain the COVID-19 is adding to risk aversion that's partly behind the dollar's dominance," he added. China's yuan fell to a one-year low against the dollar and was last down 0.9 percent at 6.56 yuan per US dollar.

The People's Bank of China on Monday said it would cut the FX reserve requirement ratio (RRR) by 100 basis points to 8 percent beginning May 15, to "improve financial institutions' ability to use foreign exchange funds", according to an online statement. It was a move aimed at slowing the depreciation of the yuan.

"We expect this RRR cut to slow down CNY depreciation in the near term, though it would also depend on the broad US dollar path and overall sentiment towards Chinese growth," said Goldman Sachs in a research note.

The Aussie, which was one of the biggest gainers in currencies in the first quarter of 2022 thanks to surging commodity prices, fell broadly. It dropped 0.9 percent against the US dollar to US$0.71 and fell 1.4 percent versus the Japanese yen to 91.88 yen.

The Norwegian crown also fell nearly 2 percent versus the US dollar, which last traded up at 9.12.

Broader currency market volatility gauges ticked higher, with an index rising to its highest levels in more than a month. BofA Securities strategists said despite the pickup in currency market volatility, investors were long the Canadian dollar, Aussie, and euro.

The euro's tiny gains after French President Emmanuel Macron's comfortable election victory over far-right rival Marine Le Pen quickly faded, with the single currency down 0.9 percent at $1.07, against a resurgent dollar.

The latest positioning data for last week showed hedge funds trimmed their long euro bets.

Hawkish comments by various policymakers last week also raised the risks of aggressive policy tightening by global central banks. Money markets expect the US Federal Reserve to raise interest rates by a half-point at the next two meetings and the European Central Bank to raise interest rates by 25 basis points in July.