The euro and oil slipped on Wednesday as a rally the previous day fizzled on fears about Europe's spreading debt crisis and the potential for a further reduction of positions in risky assets.

Asian stocks also fell, tracking weakness on Wall Street as firmer commodity prices were offset by lingering concerns over the economic outlook for the United States as well as euro zone debt woes.

The euro, which had rallied after better-than-expected German business confidence data on Tuesday, edged back in the direction of a two-month low of $1.3968 hit earlier this week as worries over Greece's finances cast a pall over the single currency. It has lost roughly 6 percent since early May.

Speculative selling of the euro intensified on vague market talk that Greece may call a snap election and as investors trimmed risky positions, with a drop in U.S. stock index futures adding to pressure on the euro.

Europe's policy options to avert a Greek debt default appear to be dwindling fast, casting a pall over the single currency and fuelling fears of a chain reaction in other heavily indebted countries in the 17-nation euro area.

Concern about Spain and Italy might be overblown, but the Greece issue is not going away, and if Greece restructures, that may open the door for Ireland and Portugal. said Brian Dolan, chief strategist at

The U.S. dollar <.DXY> rose 0.37 percent against a basket of major currencies.

A Greek debt default would hurt other peripheral euro zone states and could push Portuguese and Irish debt into junk territory, Moody's said on Tuesday, warning it would classify most forms of restructuring as a default.

As investors reduced exposure to riskier assets, MSCI's index of Asia-Pacific stocks outside Japan fell 0.7 percent while the Nikkei <.N225> closed down 0.6 percent.

According to research by TrimTabs, global equity ETF investors are increasingly bearish on Asia and Asia equity ETFs redeemed $499 million in the past week, the heaviest weekly outflow in a year.

South Korea, Japan, China, and India ETFs posted the largest outflows, while Indonesia ETFs managed to take in money. Mutual fund investors are also selling Asia.

Oil slid as the dollar rebounded against the euro, giving up some of its 2 percent rise overnight after Goldman Sachs raised its price forecasts for Brent crude. Brent crude for July delivery fell below $112 a barrel.

Gold inched down after having rallied to its highest level in three weeks in the previous session, but bullion priced in euro struck a record on concerns about the impact of a possible debt default by Greece on other euro zone economies.

Spot gold fell to $1,522.42 an ounce after rising as high as $1,527.45 on Tuesday, its strongest since May 4.