Asian markets slipped Thursday and the euro sat around four-month dollar lows as eurozone fears reared again, with Italy's politicians still unable to form a government weeks after an election.
The dollar also slipped as traders moved into the safety of the yen owing to growing uncertainty over the global outlook.
Tokyo fell 1.09 percent, Hong Kong was 0.98 percent lower, Sydney lost 0.33 percent, Seoul shed 0.13 percent and Shanghai tumbled 2.01 percent.
The losses followed a sell-off in Europe and the United States ahead of the reopening of banks in Cyprus after almost two weeks, under strict capital controls following the weekend's bailout that included a tax on some savings.
"Investors are not worried about Cyprus per se, as it comprises such a small component of Europe's GDP," SMBC Nikko Securities general manager of equities Hiroichi Nishi told Dow Jones Newswires.
But they are concerned about "the 'contagion effect' of a possible run on banks spreading to other parts of the eurozone," he said.
"It may yet have broader implications for economies there and lead to a longer-lasting 'risk-off' mentality," he added.
In Italy centre-left leader Pier Luigi Bersani struggled to form a coalition after polls in February that saw an anti-austerity party burst on to the political scene, holding the sway of power.
Bersani failed in talks with political parties to form a government after the anti-cuts Five-Star Movement rejected his overtures.
"Only a mentally ill person could have an itching desire to govern right now," Bersani said during talks with the group, which he has repeatedly tried to woo.
Business leaders and trade unions sounded the alarm this week over the parlous state of the eurozone's third largest economy, which is suffering its longest recession for 20 years.
Adding to traders' concerns was a rise in Italian borrowing rates for five-year debt to a five-month high as demand was weak in an closely watched auction.
Renewed fears over the eurozone sent the single currency tumbling below $1.28 for the first time in four months in London on Wednesday and edging further in New York.
In early Asian trade Thursday it bought $1.2783, compared with $1.2779 late in New York Wednesday. It also fetched 120.48 yen from 120.63 yen.
The dollar bought 94.20 yen, down from 94.40 yen in New York.
On Wall Street the Dow fell 0.23 percent, the S&P 500 was flat and the Nasdaq added 0.12 percent.
Shares also fell in Europe, with Frankfurt, Paris and Milan all losing around one percent.
On oil markets prices rose, with New York's main contract, light sweet crude for delivery in May gaining 13 cents to $96.71 a barrel and Brent North Sea crude for May delivery increasing 19 cents to $109.88.
Gold was at $1,605.40 an ounce at 0215 GMT compared with $1,594.10 late on Wednesday.