The dollar rolled back sharply from three-year highs on Friday and demand for euro zone government debt rose as investors fretted that U.S. employment data would be worse than previously forecast.
Japanese shares tumbled to a fresh 25-year low on worries about the global banking industry but European shares put in modest gains.
The U.S. Labor Department is to release one of the most closely-watched U.S. indicators later in the day, the monthly non-farm payrolls report.
Economists expect 648,000 jobs were lost in the United States in February after 598,000 were shed in January, and see the unemployment rate rising to a 25-year high of 7.9 percent from 7.6 percent the previous month.
The report is significant because it hints at future consumer confidence -- and hence spending -- patterns in the world's largest economy.
Jitters over the report could be seen most directly on foreign exchange markets, where the dollar index, a gauge of the greenback's performance against a basket of currencies <.DXY>, dropped around 1 percent.
Trading was subject to intense speculation that the jobs report could be worse that forecast.
The rumor of a very bad number for U.S. payrolls data in a normal world would be good for the dollar, but the knee-jerk reaction this time round has been to sell it, State Street currency strategist Lee Ferridge said.
As a result of the dollar's weakness, the euro was up around 1 percent at $1.2681 and the dollar lost 0.6 percent to 97.30 yen.
Euro zone government bonds climbed, extending the previous session's rally. The two-year Schatz yielded 1.163 percent, three basis points less than in late Thursday trade while the 10-year Bund yield was 6 basis points down at 2.956 percent.
MSCI's all-country world stock index was flat to slightly higher, supported by Europe's gains. The pan-European FTSEurofirst 300 <.FTEU3> was up 0.5 percent.
But Japan's markets were hit hard by a spread of overnight worries about the U.S. banking sector.
Tokyo's Nikkei average dropped 3.5 percent to hit a four-month closing low and the broader Topix <.TOPX> declined 2.7 percent to 721.39, a fresh 25-year closing low.
Japanese stocks are going be extremely weak until the U.S. stock market regains some composure, said Yoshinori Nagano, senior strategist at Daiwa Asset Management. But U.S. stocks won't be able to do that until investors fully grasp how bad things are at U.S. banks.