The U.S. dollar slumped to a four-month low Monday as investors begin what could be a major re-calibration of growth and inflation assumptions in the world's biggest economy and the ripple affect that will have on various global currencies.

Market reaction to Friday's decision by House Republicans to pull a vote on repealing and replacing the Affordable Care Act has mostly been felt in the currency markets, where the dollar has sunk to its lowest level -- 98.92 -- against a basket of six global currencies since Nov. 11. (TheStreet's Douglas Borthwick predicted nearly a month ago that the dollar would weaken in the shorter term before strengthening over a longer period. Click here to read his analysis.)

The overnight move lifted the yen to multi-month highs against the greenback and boosted the euro, which also found support from a solid win in regional German elections for Chancellor Angela Merkel's Christian Democratic Party and traded 0.5% higher at 108.54. 

Former Atlanta Fed President Dennis Lockhart suggested a possible change in market assumptions during an interview with Bloomberg Television in Hong Kong, arguing the central bank has room for around two more rate hikes this year after lifting the Fed Funds rate range by 0.25% on March 15. 

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He also said it may be "a little more difficult to get to the fiscal impact that was assumed" when President Donald Trump was elected in November if the Administration's failure on health care is an indication of its ability to push through tax and trade reforms. 

What may prove crucial in the days ahead, however, is reaction in global fixed income markets -- particularly 10-year U.S. Treasury notes -- and the signals they provide for the pace and strength of the U.S. equity market rally.

Benchmark 10-year notes traded 5 basis points lower at 2.36% in Asia dealing, with 2-year notes falling 3 basis points to 1.23%. That reaction may appear tame when compared to the greenback's slide, however, given that 10-year notes traded at 2.26% and 2-year notes at 1.01% the last time the dollar index was marked this low. 

It's worth setting the bond and currency market reaction against the last week's Bank of America Merrill Lynch fund managers' survey, in which a net 81% of the 200 investors polled said U.S. stocks were the most overvalued in the world.

However, the survey also indicated that investors thought faster Fed tightening would be the most important catalyst to slowing the stock market's bull run, a condition that could take longer to materialize if the early signals from bond and currency markets prove correct.