The dollar sank and European and Asian equity markets fell today as investors grew more worried about global trade imbalances, the nuclear standoff with Iran and surging oil prices.
However, there were signs that Friday's Wall Street tumble, the biggest in almost three years, was not expected to continue as US stock futures pointed to a firmer opening today.
The dollar retreated after New York Federal Reserve President Timothy Geithner said the massive and growing US current account deficit presented a threat to the world economy.
The euro gained 1 per cent against the dollar to trade at a four-month high above $1.2270, while the dollar shed 0.9 per cent against the yen, buying 114.30 yen.
The FTSEurofirst 300 Index sank to 1,270.9 points, its lowest level so far this year, before paring losses to trade down 0.5 per cent at 1,277 points.
In Tokyo, the Nikkei average slid 2.1 per cent to 15,360.65 points as fallout from an investigation by prosecutors into Internet portal Livedoor Co. lingered.
The risk of surging energy prices dented consumer demand remained a concern for stock market investors.
US light crude spiked as high as $69.20 a barrel, its highest since Hurricane Katrina hit the US Gulf Coast, after disruptions to Russia's natural gas exports added to concerns about supplies from Iran and Nigeria.
An intensifying militants' campaign against Nigeria's foreign oil companies and rising tensions over Iran's nuclear programme have helped push oil prices up more than $10 since late December.
On Monday, a senior Iranian official was quoted as saying that Tehran would resume industrial-scale uranium enrichment if it was referred to the UN Security Council.
Crude last traded down 50 cents at $67.96 a barrel.