Political uncertainty ahead of European elections prompted nervous investors to sell the euro and kept French government debt under pressure on Wednesday while the price of safe-haven gold hit three-month highs.
U.S. stock futures pointed to a weak start on the financial market after shares rose in Europe and Asia.
Industrial companies' shares led the charge in Europe. France's Vinci rose 5 % after results reported after the market closed on Tuesday. Vinci hiked its dividend and forecast higher revenue for 2017.
Three months before the final round of France's presidential election, investors are concerned about the strong showing of far-right candidate Marine Le Pen, who has promised to take France out of the euro zone and to hold a referendum on European Union membership.
While polls suggest Len Pen would not win, several other front runners' campaigns are in disarray.
Euro zone government bond yields fell broadly, though French debt lagged the rest, with 10-year yields falling 3 bps to 1.1 % but holding close to 17-month highs touched on Monday. Low-risk German equivalents fell 5.4 bps to 0.31 %, a two-week low.
This pushed the gap between the two yields at one point to more than 78 bps, its widest since November 2012, also fueled by expectations the extent of the European Central Bank's bond-buying stimulus scheme has peaked.
"If you step back, the big picture still remains - that of political concerns in Europe concomitant with speculation over ECB tapering," said Rabobank's head of rates strategy Richard McGuire.
The premium investors demand to hold low-rated Italian 10-year bonds rather than German Bunds hit its highest since 2014.
Apart from German debt, investors also bought gold, which is seen as a safe investment in uncertain times. Spot gold hit a three-month high of $1,240.40 an ounce.
The euro currency weakened a further 0.2 % to $1.0653 after a sharp fall on Tuesday.
Options markets show the biggest bias for euro weakness against the dollar since late June.
The dollar, whose predicted path higher has been interrupted lately by uncertainty over U.S. President Donald Trump's economic policies, rose 0.2 % against a basket of other major currencies.
Investors are still waiting to see whether Trump makes good on his campaign pledges to cut taxes and boost spending.
Against the yen the dollar fell 0.2 % to 112.12 yen. Sterling was flat at around $1.25 but up 0.2 % versus the euro at 85.2 pence per euro.
"The French political noise has brought the euro down and that has given the dollar a reprieve," said Gavin Friend, a strategist with National Australia Bank in London.
"Markets know that if Trump was to come out and start talking about tax reform and infrastructure spending, the dollar would go up. The dollar rose a long way at the end of last year, it has come back, now we are sitting around waiting for the next steer."
In stock markets, the pan-European STOXX 600 index rose 0.2 % while Britain's FTSE 100 fell 0.1 %.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.2 % in late trade, after spending most of the session in negative territory.
Japan's Nikkei rose 0.5 %.
Oil prices fell after American Petroleum Institute data on Tuesday showed a larger-than-expected rise in U.S. crude inventories and after signs of slowing demand growth in China.
"The API delivered a Goliath crude inventory number ... The second-highest on record. The reaction was predictable, as the herd, already nervous from the previous day's price action, turned en masse and ran off the cliff," said Jeffrey Halley of futures brokerage OANDA in Singapore.
Brent crude last traded at $54.88 a barrel, down 17 cents.
Copper prices rose 2 % to just above $5,900 a tonne after the world's biggest mines said they planned to cut output due to strikes and other issues.
BHP Billiton said it would halt output at Chile's Escondida mines, the world's biggest, and Freeport-McMoRan warned it would scale back activities at its Indonesian mine.