Asian markets fell Tuesday as concerns grew about the global financial system, while emerging currencies such as the South Korean won extended their recent sell-off.
Strong gains in Asian shares on Monday were completely erased as optimism over reports that the U.S. government could take a bigger stake in Citigroup gave way to fresh questions about whether Washington is doing enough to stabilize the ailing banking and credit sectors.
Traditional investor havens in times of turmoil such as the dollar and gold dipped, though analysts predicted these asset classes could soon resume their recent rallies as the uncertainty in global markets continues.
Problems in the global financial system continue to multiply as massive credit losses and recession weigh on lenders. American International Group, which was rescued twice last year by the U.S. government, is in talks with officials for more aid, while in France the government is expected to provide more funding to two mutually owned banks.
Emerging Asian currencies were among the hardest hit by the continued market turbulence. South Korea's won was was hardest hit. Korean markets have been battered by a collapse in Asian exports amid the global demand slump, and by the economy's reliance on short-term overseas debt that needs to be refinanced in the toughest market conditions in years.
Among major currencies, the dollar slipped against the yen as some investors booked profits on the previous day's rally, when the U.S. currency struck a three-month high of 94.95 yen on trading platform EBS. The euro edged lower against the yen , staying under pressure after European Central Bank President Jean-Claude Trichet said on Monday the euro-zone financial system is under severe strain. The weak global demand outlook continues to undermine oil prices, sending oil futures down to $38 a barrel, extending declines from the previous session.