The euro hit an 18-month low versus the dollar and global shares fell sharply today over fears Europe's fiscal austerity plans may derail economic recovery.
Worries about fallout from the euro zone debt crisis spurred appetite for safer investments, pushing gold to a record high and supporting demand for US treasuries.
Stocks and commodity prices plunged, despite data showing US retail sales and industrial production rose firmly in April. Major US stock indexes traded with losses of 1 per cent to over 2 per cent.
European authorities announced a massive debt safety net for Greece, Spain and Portugal this week, but investors remain skeptical those countries can take the pain of overhauling weak public finances.
The MSCI world equity index plunged 2.81 per cent, while the FTSEurofirst 300 index slumped 3.7 per cent. US crude oil fell roughly 3 per cent on the day to hit a three-month low of $72.17 per barrel.
The Dow Jones industrial average dropped 178.74 points, or 1.66 per cent, to 10,604.21.
The EU's emergency assistance plan has done little to bolster confidence in the euro system, a concern highlighted by US While House Economic Adviser Paul Volcker. Mr Volcker said European debt troubles could undermine the single currency.
The euro slid as low $1.2365 on electronic trading platform EBS, the lowest since October 2008. It last traded at $1.2380.
"The euro hasn't derived any benefits from any budget cuts from Spain and Portugal," said Chris Turner, head of FX strategy at ING, which forecasts the euro will be at $1.15 in six months.
"People are either concluding that these cuts will be unsuccessful and debt sustainability remains a key issue, or they will be successful in aggressive fiscal tightening and that these economies would slow aggressively and the European Central Bank has to keep interest rates low," he added.