The euro hovered near 10-month lows on Thursday as a credit downgrade on Portugal added to worries about debt levels in Greece and other parts of Europe, weighing on riskier assets such as shares and commodities.
Investors were waiting for an EU summit on Thursday and Friday for any signs of assistance for Athens, after efforts to arrange a special euro zone meeting failed, with France and Germany discussing what role the IMF might play.
The euro edged up 0.1 percent from late U.S. trade to $1.3326 after falling more than 1 percent overnight after Fitch Ratings lowered Portugal's rating. The single currency is at its lowest against the dollar since early May 2009.
Diplomatic efforts on the eve of the EU summit failed to bridge differences over whether to offer a safety net to Greece.
Germany does not want to have a meeting of euro zone leaders unless there is a definite chance for a deal, an EU diplomat said.
Worried by the signals this would send, another envoy said: If there is no meeting of euro zone leaders, we can expect markets to see that negatively as a sign that the Europeans are unable to reach an agreement (on Greece).
The euro is expected to remain weak unless a divided EU manages to break its deadlock over how to help Greece, a trader at a Japanese bank said.
Sentiment for the euro has further deteriorated as it still looks as if euro zone nations are in a state of chaos over a rescue plan, the trader said.
The MSCI index of Asian shares outside Japan <.MIAPJ0000PUS> fell 0.4 percent, with Hong Kong shedding more than 1 percent, as concerns about weakness in Europe prompted investors to move out of riskier assets.
Japan's benchmark Nikkei average <.N225> edged up 0.1 percent as exporters such as Canon Inc <7751.T> were supported by a weaker yen, offsetting weakness in commodity related shares.
Wall Street fell overnight as the Portugal downgrade and a weak U.S. Treasury note auction fanned worries about sovereign debt, eclipsing data showing U.S. durable goods orders rose for the third straight month, which confirmed its economic recovery was on course. <.N>
The Dow Jones industrial average <.DJI> closed down 0.48 percent, while the Standard & Poor's 500 Index <.SPX> was down 0.55 percent.
The dollar largely held on to its broad gains against the euro on Wednesday, which in turn pushed down prices of commodities denominated in U.S. dollars.
The dollar index, a gauge of its performance against other major currencies, was trading around 81.865 <.DXY>, after touching a 10-month high of 82.026 on Wednesday.
Against the yen, the dollar slipped 0.4 percent to 92.02 yen, having risen to a 10-week high of 92.42 yen on EBS on Wednesday.
Spot gold rose over $1 to $1,088.05 an ounce at 0252 GMT, regaining some ground after sliding to a near 6-week low in New York as the dollar strengthened.
NYMEX crude for May delivery fell 30 cents to $80.31, after tumbling $1.30 on Wednesday.
Shanghai's benchmark third-month copper futures contract fell to 58,900 yuan a tonne, lowest since March 16, before recovering to 59,040 yuan by midmorning, down 0.4 percent from the previous close.
U.S. Treasuries, which typically are a safe haven when risk appetite ebbs, were also hit by poor demand in an auction of five-year notes, which left investors apprehensive about a massive supply of new debt in the next few days.
(Additional reporting by Timothy Heritage in Brussels and Kaori Kaneko in Tokyo; Editing by Kim Coghill)