The euro fell to a 20-month low on Monday and investors fled riskier assets after Italian Prime Minister Matteo Renzi said he would resign following a stinging defeat on constitutional reform that could destabilize the country's shaky banking system.
Renzi's defeat deals a body blow to a European Union already reeling under anti-establishment anger that led to the shock exit of UK from the club in June.
The single currency, which opened at around $1.0685, slumped as much as 1.4 percent to $1.0505 EUR=, its lowest since March 2015, before recovering a bit to $1.0539.
The drop to its session low was the sharpest since June and opened the way to a retest of the March 2015 trough around $1.0457.
"It’s not very hard to see a new election, and it’s not very hard to see the (opposition) 5-Star Movement taking power and they’ve basically said they want to get out of either the European Union or the euro or both,” said Mark Wills, head of State Street Global Advisors' investment solutions group for the Asia Pacific.
The euro slid as much as 2.1 percent EURJPY= to 118.71 yen, but pared some of the losses to trade down 1.2 percent at 119.73 yen.
The dollar was supported by expectations of a U.S. rate increase this month and gained 0.1 percent to 113.645 yen JPY=.
The dollar index, .DXY, which tracks the greenback against a basket of six global peers, jumped 0.7 percent to 101.49.
The New Zealand dollar NZD= slipped 0.5 percent to $0.7091 after Prime Minister John Key unexpectedly announced his resignation on Monday, saying it was the "right time" to leave politics.
New Zealand stocks extended losses to trade 0.7 percent lower.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS eased 0.4 percent, while E-mini futures for the S&P 500 ESc1 narrowed losses to 0.3 percent.
Japan's Nikkei .N225 slid 0.7 percent.
While the long-awaited opening of the Shenzhen-Hong Kong Stock Connect went live on Monday, global risk aversion weighed on China's and Hong Kong's main indices.
China's CSI 300 .CSI300 index tumbled 1.8 percent. Hong Kong's Hang Seng index .HSI slipped 0.2 percent.
The link between China's booming Shenzhen stock market and neighboring Hong Kong allows foreign investors access for the first time to some of the fastest growing technology companies in the world's second-biggest economy.
Back in Europe, dealers said Italian bonds were set to come under pressure as top-rated U.S. Treasuries and German bunds gained. Futures for U.S. 10-year Treasury notes added 5 ticks <0#TY:>.
Investors and European politicians fear the 'no' camp's victory could cause political instability and renewed turmoil for Italy's banking sector, which has been hit by fears over its huge exposure to bad loans built up during years of economic downturn.
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