The euro hit a lifetime low against the Swiss franc and an 8 1/2-year trough versus the yen on Tuesday as stocks weakened and investors braced for a key euro zone refinancing programme to expire this week.
The yen rallied as a 2 percent fall in European shares .FTEU3 raised the safe-haven appeal of the Japanese currency, along with the Swiss franc and the dollar, while the high-risk Australian and New Zealand dollars took a beating.
Equity markets are weak, so there's been a reasonably large reverse in risk-taking behaviour, said Daragh Maher, senior currency strategist at Credit Agricole.
It's been an amplified reaction, due to limited liquidity, and it will be difficult to tell how far the selling will extend.
By 0944 GMT, the euro EURJPY=R had fallen more than 1.5 percent on the day to 107.80 yen according to trading platform EBS, its weakest since late 2001. It fell to 1.3250 francs EURCHF= the lowest since the single currency's 1999 launch.
The Swiss franc has gained broadly since the Swiss National Bank earlier this month backed off its pledged to intervene in the currency market to stem franc strength.
Against sterling, the single currency EURGBP=D4 fell to 80.92 pence, its weakest since November 2008. It fell roughly 0.7 percent on the day to a two-week low of $1.2178 EUR=, according to Reuters data.
Pressuring the euro were concerns that banks on Thursday must repay 442 billion euros borrowed a year ago at rock-bottom rates as part of the European Central Bank's efforts to boost liquidity.
The ECB holds a three-month tender on Wednesday which many in the market expect will be tapped as banks scramble to pay back the one-year funds. Expectations are that 210 billion euros will be allotted at the offer.
Analysts said such funding needs reflected ongoing stress in the banking sectors of some euro zone countries, including Portugal, Ireland, Italy, Greece and Spain, which were pushing the euro lower.
Investors are worried that PIIGS banks may take significant liquidity from the system (in the three-month offer), said John Hydeskov, senior currency analyst at Danske in Copenhagen.
ECB Governing Council member Christian Noyer said the central bank would do everything necessary to make sure the expiry of the one-year funding programme passed smoothly.
A 2 percent fall in oil prices CLc1 also prompted investors to dump higher-risk currencies including the Australian and New Zealand dollar, which each fell nearly 2 percent versus the dollar and around 2.5 percent versus the yen.
The Japanese currency also rallied against the dollar JPY=, which fell to 88.54 yen, its weakest since early May.
Some in the market said not all yen strength was being driven by safe-haven flows, with some pointing out that a drop in U.S. Treasury yields, which makes U.S. debt less attractive to Japanese investors, had also been weighing on dollar/yen.
The benchmark 10-year U.S. Treasury yield US10YT=RR fell below the key 3 percent level to strike a 14-month low. [US/]
Financial markets will also closely watch debt auctions by France and Spain later this week after tepid demand for Italy's sale of 7 billion euros of government bonds on Monday kept investors worried about euro zone debt problems. (Editing by Mike Peacock)