(Reuters) - Asian shares, the euro and oil prices fell Thursday as surging borrowing costs in Spain heightened fears of euro zone dent contagion.
Japan's Nikkei average <.N225> slid 2 percent while MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> looked set to revisit its 2012 low with a decline of 0.8 percent.
The euro fell in early Thursday trade to a 23-month low of $1.2361 and a 4-1/2 month low against the safe-haven yen below 97.70.
Problems in Spain, a large euro zone economy, heighten fears while the risk of Greece leaving the euro bloc raises contagion concerns. The euro remains depressed, with players cautiously testing the downside.
A caution by Spain's central banker that Madrid will miss deficit targets this year pushed Spanish 10-year yields above 6.7 percent, close to 7 percent, a level seen as unsustainable and which could push Spain to seek a bailout.
The cost of insuring against a Spanish default scaled a record high near 600 basis points whileItaly, which is also struggling with huge public debt, saw its 10-year yields top 6 percent for the first time since January.
Yields on all German bond maturities hit record lows on Wednesday, pushing the premium investors demand to hold Spanish debt over German debt to its highest since the launch of the euro at around 543 basis points.
As risk aversion gripped financial markets broadly, strong bids for safe-haven assets sent 10-year U.S. Treasury yields down to their lowest in at least 60 years at 1.620 percent on Wednesday. The yield on five-year Japanese government bonds fell to 0.20 percent, its lowest since October 2010.
The dollar index <.DXY>, measured against a basket of major currencies, extended its rally to reach its highest level since September 2010 above 83.1 on Thursday. The yen rose to a 3-1/2 month high against the dollar at 78.86.
Some analysts said the dollar index could be in for a sustained period of dollar strength for the next couple of years.
The strong dollar and intensifying risk aversion sent the Thomson Reuters-Jefferies CRB index <.CRB>, a global benchmark for commodities, tumbling 1.7 percent on Wednesday to its lowest levels since September 2010.
Oil prices fell to multi-month lows on Wednesday and looked set to post their biggest monthly declines since October 2008, a month after the collapse of Lehman Brothers.
U.S. crude futures were down 0.3 percent at $87.60 a barrel on Thursday, after slumping $2.94 to settle at $87.82, the lowest settlement since October 21, 2011.
Brent crude fell 0.3 percent to $103.19 a barrel on Thursday after falling more than $3 to settle at $103.47 a barrel, the lowest settlement since Dec. 16.