The euro hit a nine-year trough on Wednesday as collapsing oil prices and worries about the world economy drove skittish investors into the arms of safe-haven sovereign debt.
From Japan to Germany to Australia, government borrowing costs fell to all-time lows as oil fell 10 percent in just two days -Brent crude broke below the psychological $50 barrier - as investors wrestled with the risk of global deflation.
European stocks opened higher, after Asia just about managed to hold up in positive territory, but nervousness ran deep through all financial markets ahead of euro zone inflation data due later Wednesday.
The figures are expected to show the first annual fall in consumer prices since 2009, piling pressure on the European Central Bank to launch all-out quantitative easing at its next policy meeting on Jan. 22.
But despite the growing threat of deflation, the ECB may be reluctant to act before Greece's general election on Jan. 25, a vote which some observers say could hasten the country's exit from the euro zone if the left-wing Syriza party wins.
"Given the fact that Greece will not have an official government in place at that time, the ECB may have to wait," said Marshall Gittler, head of global FX strategy at IronFX.
"The euro has not been able to sustain any rallies this year and so looks chronically weak," he said.
The euro fell as low as $1.1842 in anticipation of more money-printing by the ECB. In early European trading, it was down slightly from the previous day around $1.1870.
The dollar fared better, bouncing to 119.15 yen from a low of 118.04 touched on Tuesday.
YIELDS GOING, GOING...GONE?
The breakneck decline in oil showed no sign of letting up. Brent LCOc1 fell more than 2 percent to dip below $50 a barrel for the first time since early 2009. It has shed more than 11 percent so far this week. U.S. crude CLc1 fell to $47.02.
With fears of deflation rampant, yields on longer-dated Japanese, German, French, Dutch, Austrian, Belgian, Finnish, Canadian and Australian bonds all touched record lows.
Euro zone inflation expectations, measured by the ECB's preferred gauge of so-called 5-year forwards, fell to a fresh low of 1.58 percent. That's well below the central bank's target of just under 2 percent.
All yields on German bonds out to 5 year maturities were negative on Wednesday and the 10-year yield was 0.45 percent. The benchmark U.S. 10-year yield was steady at 1.959 percent.
Investors also pushed back their expectations for the day when the Federal Reserve might be able to hike U.S. interest rates. Fed fund futures <0#FF>: imply no chance of a hike by June and only one rise to 0.5 percent by year end.
Minutes of the Fed's last policy meeting are due later Wednesday and should expand on where members felt rates were heading.
Even if the Fed sticks to its current timetable and moves around mid-year, markets are wagering it will be so far ahead of the curve that inflation will remain permanently low.
As a result, investors are willing to accept less compensation for inflation risk over time, so pulling down yields on even the longest dated bonds.
Yields on U.S. 30-year paper fell to 2.51 percent, above the all-time trough of 2.443 percent hit on Tuesday.
Equity markets showed more life after a run of torrid sessions. Japan's Nikkei .N225 edged up 0.2 percent and the MSCI's broadest index of Asia-Pacific shares outside Japan.MIAPJ0000PUS inched up 0.1 percent.
The FTSEurofirst 300 index of leading shares was up 0.5 percent .FTEU3, and the major U.S. stock index futures pointed to a higher open of around 0.25 percent on Wall Street.
That would break a run of five straight losing sessions, the longest losing streak since late 2013 for the S&P 500 .SPX.
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