Asian markets fell on Tuesday, with dealers spooked by an election in Italy that left no clear winner, leading to political uncertainty and fresh fears about eurozone stability.
The dollar and euro clawed back some of the losses suffered in US trade as investors absorbed the Italian results, while there is also concern about the lack of progress in Washington to avoid spending cuts due to take effect Friday.
Tokyo tumbled 1.83 percent, with profit-takers playing a role after the index enjoyed a big surge on Monday.
Hong Kong sank 0.79 percent, Sydney shed 0.75 percent and Seoul lost 0.47 percent while Shanghai slipped 0.42 percent.
Italy Tuesday looked headed for political deadlock as results from Sunday's election indicated there would be no clear winner, while the biggest gainer was a protest party run by a popular comedian.
The polls show that while the leftists won the lower house, the party run by former prime minister Silvio Berlusconi had more seats in the upper house.
Investors fear the outcome will lead to political stalemate in the country and a possible return to the dark days of the region's financial crisis if austerity measures introduced to cut Rome's huge debt pile are reversed.
The developments in Italy sent a shiver through forex markets in New York, with the euro tumbling to $1.3065 and 120.12 yen.
In Asia, the single currency recovered slightly, to $1.3082 and 121.02 yen. However, it is still well down from the $1.3197 and 124.24 yen in Tokyo on Monday.
The dollar fetched 92.42 yen against 91.92 yen in New York but is still well off the 94.77 yen high seen Monday in Asia.
The split vote in Italy wiped out the yen's losses on Monday that were fuelled by reports Japan's government is likely to nominate a man to run the central bank who is in favour of more aggressive monetary easing.
On Wall Street, the Dow tumbled 1.55 percent in its biggest single-day drop since November, while the S&P 500 dived 1.83 percent and the Nasdaq sank 1.44 percent.
Traders are also keeping an eye on US lawmakers to see if they can muster an agreement to avoid the imposition of $85 billion in budget cuts -- known as the sequester -- that will come in on Friday.
Analysts have warned that if less drastic cuts are not agreed, the still-fragile economy could slip back into recession.
Oil prices rose, with New York's main contract, light sweet crude for delivery in April, dropping 78 cents to $92.33 a barrel and Brent North Sea crude for delivery in April shedding 80 cents to $113.64.
Gold was at $1,597.70 at 0205 GMT compared with $1,593.30 late Monday.