Hong Kong - The euro fell to a record low against the Swiss franc on Monday as worries about eurozone debt sapped demand for riskier assets such as Asian stocks and prompted investors to shift funds into US government debt, gold and the dollar.
European shares are set to take their cue from Asia, with financial spread betters calling major indexes to open between 0.8% and 1.2% lower.
The euro came under fresh selling pressure after Fitch Ratings cut Greece's debt ratings by three notches on Friday, pushing the country's debt deeper into junk status, while rival Standard & Poor's cut its outlook for Italy to "negative" from "stable" on Saturday.
The news undermined already weak sentiment in stock markets, which have seen a stream of headlines about the euro area's debt problems.
Japan's Nikkei average and Australia's benchmark index each fell more than 1.5% as investors shed riskier assets.
Seoul shares shed 2.6%, led by declines in shares of Hyundai Motor and Kia Motors , whose production is being disrupted by a strike at one of their suppliers.
Outside Japan, MSCI's index of Asia Pacific shares dropped 2%, adding to four consecutive weeks of declines.
The rush towards safe-haven assets helped US Treasury bonds build on Friday's gains.
While the five-year yield is on the verge of falling below the 200-day moving average, 10-year yields were down 3 basis points at 3.12%.
Euro's woes worsen
The Swiss franc gained from the euro's woes as investors shifted to traditional safe havens.
The euro breached support near 1.24 against the Swiss unit, and hit a record low of 1.2345 francs on trading platform EBS before trimming its losses to stand above 1.2360.
Against the dollar, the euro slipped further below $1.41, having triggered some stop-loss selling near that level.
The euro's fortunes have turned around dramatically after hitting a peak of near $1.4940 in early May. Having cheered the ECB's rate rise, investor sentiment has swung to worrying about the impact of rising interest rates on the euro area's weaker economies.
In addition, considerable net long positions in the single currency and a deteriorating technical picture add to the downside potential of the currency, with $1.35 eyed in the near term.
"The prospect of ECB rate hikes is no longer sufficient reason to buy the single currency, and in fact it may become the case that rate hikes will be seen as EUR-negative should peripheral concerns intensify," Credit Agricole CIB strategists said in a daily note.
The euro-related concerns sparked a safety bid towards the US currency, propelling the dollar index - which measures its value against a basket of currencies - to a seven-week high.
Still, significant gains may be limited as the Fed nears the end of its quantitative easing programme in June owing to worries that the US economy has yet to show a clear recovery path. Stocks, bonds, gold and the euro are expected to fall in the three months after the end of the $600bn plan, a Reuters poll shows.
US crude futures retreated further below $100 per barrel on expectations the threat to air travel from a volcanic eruption in Iceland could reduce oil demand in Europe.
Gold, which benefited from a safe haven bid, extended gains to a two-week high