The euro steadied on Monday but remained under pressure after Fitch downgraded Spain's credit rating and France said keeping its top credit rating may be a stretch without tough budget cuts.
The European single currency is on track for a hefty 7.7 percent drop against the dollar in May on worries that Greece's debt crisis will spread to other countries in the euro zone, potentially derailing the global economic recovery.
May's decline would be the euro's sixth straight monthly fall and its biggest percentage drop since January 2009.
European shares were expected to open slightly higher, tracking modest gains in Asia, but trade was likely to be thin with U.S. and UK markets closed for holidays.
Asian stocks outside of Japan rose 0.3 percent but looked set to post their worst month since October 2008 as Europe's sovereign debt woes prompted investors to dump riskier assets such as equities and commodities.
The market is susceptible to negative news and small rallies in the euro on short-covering don't last for long, said a trader at a Japanese bank.
This jitteriness in the market is likely to continue for a while, and it is difficult to see a recovery in market sentiment as there are worries that further bad news about southern European countries may come out, he said.
The euro was steady at $1.2282, staying above a four-year low of $1.2143 hit this month.
The currency fell 0.8 percent on Friday after Fitch cut Spain's credit rating by one notch to AA-plus, saying the country's economic recovery will be more muted than the government forecast due to its austerity measures.
Underscoring worries about regional debt pressures, France admitted on Sunday that keeping its top-notch credit rating would be a stretch without some tough budget decisions, following German hints that Berlin may resort to raising taxes to help bring down its deficit.
The euro was also capped on Monday by remarks from China's Premier Wen Jiabao, who said global growth remained vulnerable to sovereign debt risks and the possibility of a second downturn.
The euro rose 0.8 percent against the yen to 112.69 yen while the dollar rose 0.5 percent against the yen to 91.50 yen, a 10-day high.
Traders are awaiting manufacturing surveys from Europe, Britain, China and the United States on Tuesday which may provide the first detailed look at whether May's market mayhem inflicted any serious damage on the global recovery.
Market attention is also shifting to the U.S. employment report for May due on Friday to see whether it can help revive market confidence, even as concerns about Europe's fiscal problems continue.
The market is waiting for the jobs data to see if the U.S., whose economic figures are relatively firm, could provide support for the global economy, said Satoshi Okagawa, head of forex and money trading at Sumitomo Mitsui Banking in Singapore.
WORST MONTH SINCE LEHMAN
Despite modest gains for the day, the MSCI index of Asia Pacific stocks outside Japan <.MIAPJ0000PUS> was on track for a loss of more than 11 percent for May, its worst month since the aftermath of the Lehman Brothers collapse. The index has lost close to 9 percent so far this year.
Japan's Nikkei <.N225> ended up 0.1 percent as the yen sagged to a 10-day low against the dollar, boosting shares of Japanese exporters. The Nikkei lost 11.7 percent on the month.
According to Nomura, the last two weeks of May saw net outflows of US$24 billion from global equity mutual funds as market volatity grew, which in absolute terms, negated inflows from the past 15 weeks.
U.S. crude oil futures rose 45 cents to $74.44 a barrel.
Front-month crude fell $12.18, or 14.1 percent, in May, the biggest monthly percentage loss since December 2008, on worries that a setback in the global recovery would dampen energy demand.
Spot gold rose to $1,213.90 an ounce, up $1.15 from New York's notional close on Friday.
(Additional reporting by Elaine Lies and Kaori Kaneko in Tokyo)
(Editing by Kim Coghill)