The euro hit an 18-month low versus the dollar and shares fell sharply on Friday on speculation that fiscal austerity in some euro zone countries may stifle economic growth.
High-risk assets including stocks took a hit and worries about the euro zone debt crisis prompted demand for safer investments, pushing gold to a record high while the dollar hit its strongest versus a currency basket in a year.
In mid-day trading, the euro had clawed its way back to $1.247 after falling as low as $1.243, its weakest since November 2008, led by aggressive selling from macro hedge funds.
“Love for the euro is almost non-existent at the moment,” said Adam Carr, an economist at ICAP in Sydney.
“I don’t know if there is a near-term catalyst to change the euro’s fortunes.”
In one of many signs of lingering anxiety in the market, Asian equity investors seemed keen to take profits on Friday, a day after stocks had bounced on pledges from governments in Spain and Portugal to tighten their fiscal belts.
The MSCI index for Asian stocks outside Japan dropped 0.65 per cent. The index is down close to 3 per cent this year.
Japan’s Nikkei lost 1.6 per cent. Hong Kong stocks fell 1.36 per cent as investors worried that spending cuts in Europe could stifle the global recovery.
Shares in Shanghai also slipped, with the index losing 0.5 per cent on global weakness and fears that China will announce policy tightening measures.