Asian stock markets nosedived on Tuesday and the Swiss franc held near a record high, as investors dumped riskier assets in a global rout triggered by fears that political leaders are failing to tackle debt crises in Europe and the United States.
Major indexes across the region fell between 2 and 5 percent, following drop of more than 6 percent on Wall Street in the first trading session since the historic downgrade of the United States' AAA credit rating by Standard & Poor's.
The panicked flight-to-safety pushed gold to the latest in a string of record peaks, boosted the Swiss franc and the yen and lifted Japanese government bonds and, ironically, U.S. Treasuries -- the asset directly affected by the downgrade.
"Market players are seeking emergency refuge and fleeing to safe assets," said a customer trader at a major Japanese bank in Tokyo. "In the money market, where there is heightened demand for dollars, dollar lenders are running away."
While the U.S. downgrade late on Friday was the most obvious blow to confidence, investors have also been spooked by data suggesting the U.S. economy could slip back into recession and Europe's ever-worsening sovereign debt crisis.
There are also concerns about China's inflation rate, which analysts fear could curb Beijing's ability to stimulate demand to offset a global slowdown.
China will release industrial output and inflation data for July later on Tuesday and a flat to lower number could reassure markets, traders say.
"We're in a skittish market and the market is looking for some sort of circuit break. Chinese data today might potentially do it," said Grant Turley, senior currency strategist at ANZ in Sydney.
Japan's Nikkei share average fell 3.9 percent and MSCI's broadest index of Asia Pacific shares outside Japan shed 2.2 percent.
The dollar fell to an all-time low near 0.7480 Swiss francs, while the euro plumbed around 1.0640 francs. They later traded around 0.7540 and 1.0680 francs respectively.
Against the yen, the dollar slipped to around 77.45 from above 80 yen just last week, while the euro slid to around 109.75 yen from recent highs around 114.00.
Gold, a traditional refuge from financial storms, hit a record above $1,724 an ounce.
U.S. crude oil futures fell below $80 for the first time since October 2010, dropping more than $2, or nearly 3 percent, to trade around $79 a barrel.