By Chibuike Oguh and Stefano Rebaudo

NEW YORK (Reuters) -The Japanese yen and the Swiss franc gained while the U.S. dollar fell against major currencies on Monday amid a selloff in technology stocks as markets weighed the implications of a Chinese startup launching a free open-source artificial intelligence model.

China's DeepSeek rolled out a free AI assistant that it says uses lower-cost chips and less data, seemingly challenging a widespread AI bet that in the past has lifted shares of U.S. technology stocks, especially chipmaker Nvidia.

The dollar came under pressure whereas the yield on the benchmark 10-year Treasury note dropped 6 basis points to a one-month low of 4.561% as investors rushed into safe-haven assets and government bonds.

The benchmark S&P 500 lost 1.46% to close at 6,012.28, dragged down by technology stocks. Nvidia plunged 17% to $118.42, hitting a nearly four-month low.

"A lot of people seem to be taking a pretty large leap here that DeepSeek is unsettling the major tech names that's going to lead to a rout in equities, and a rout in equities is going to cause the Fed to be supportive," said Eugene Epstein, head of structuring for North America at Moneycorp in New Jersey.

"I think it's a number of steps too far but given the fact that all these different asset classes are moving in the same classical safe haven direction, it seems that's the current rationale. Whether that rationale makes sense or not is, I think it's highly debatable. But that's at least how the market seems to be reacting at the moment."

The Japanese yen rose 0.87% to 154.63 against the dollar after tightening up to 153.71, its strongest level since mid-December. The Swiss franc rose 0.50% against the greenback to $0.90155.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro,fell 0.29% to 107.36, after dropping to its lowest level since mid-December. The euro was up 0.02% at $1.0491.

The dollar recorded its biggest weekly loss in more than a year last week on expectations that tariffs enacted by U.S. President Donald Trump will be lower than previously feared. But concerns have resurfaced as the U.S. and Colombia pulled back from the brink of a trade war.

"U.S. equity markets are selling off hard and foreigners were large record buyers of U.S. stocks in December. That is a contrarian indicator," said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

"Many people were concerned already that U.S. stocks were overvalued. DeepSeek exposes these concerns," he said. "And what it did was the U.S. 10-year yield is down. That is why the yen and the Swiss franc have done relatively well."

The Mexican peso, a barometer of tariff worries, weakened 2% to 20.693 per dollar. The Canadian dollar was down 0.22% versus the greenback at 1.44 per dollar. Trump said last week he may impose duties on products from Canada and Mexico from Feb. 1.

"The Mexican peso is the weakest of the emerging market currencies today. I think it suffered in sympathy with Colombia and the threat of tariffs," Chandler said.

"While the Canadian dollar is down, it is doing a little bit better than the other dollar block currencies like the Aussie and kiwi."

The Australian dollar weakened 0.41% versus the greenback to $0.6283. The kiwi weakened 0.35% versus the greenback to $0.5689.

Major central banks, including the Federal Reserve and the European Central Bank, will meet this week after the Bank of Japan raised its rates and Governor Kazuo Ueda said last week the BoJ would keep tightening its policy as wage and price increases broaden.

The personal consumption expenditures (PCE) price index - the Fed's favourite inflation gauge - is due on Friday, while inflation data will be released from Germany, France and Japan on Friday as well.

"I think the market's going to turn cautious now ahead of Wednesday when both the Federal Reserve and the Bank of Canada meet," Chandler added.

Bitcoin fell 4.38% to $100,497.28, but still traded near the record high of $109,071.86 touched last week. Ethereum declined 6.51% to $3,112.97.

(Reporting by Stefano Rebaudo and Chibuike Oguh in New YorkEditing by Sharon Singleton, Hugh Lawson and Matthew Lewis)