London - The yen hit a 33-month low against the dollar on reports that a strong supporter of aggressive monetary easing is likely to head the Bank of Japan, while Italian assets gained as markets await the outcome of national elections.
Britain's pound also slumped against the dollar, hitting a 2-1/2 year low, following Moody's downgrade of the country's prized triple-A rating late on Friday.
Voting closes in Italy at 16:00 SA time, with exit polls due soon after.
An inconclusive result would trigger a sell-off in Italian bonds and stocks and renew concerns about the euro.
“If we don't have an indication of a clear winner, there will be pressure on Italian bond yields,” said Ishaq Siddiqi, market strategist with trading house ETX Capital.
European shares extended their slow recovery from multi-month lows in early trade as investors kept a close eye on Italy, with the FTSEurofirst 300 up 0.2 percent at 1,167.55 points.
Reports that the Japanese government was likely to nominate Asian Development Bank President Haruhiko Kuroda as the next central bank governor, along with an academic who has criticised the central bank as deputy governor, sent the yen down to 94.77 to the dollar, lows not seen since May 2010.
Tokyo shares rose 2.4 percent to a 53-month high on the news, but gains in other Asian markets were limited by data showing growth in China's giant manufacturing sector in February pulled back from two-year highs.
Sterling fell to a 2-1/2 year trough against the dollar at $1.5073 and a 16-month low against the euro of 87.75 pence after the Moody's downgrade, although the UK's main share index rose.
British government June bond futures touched a low of 115.50, some 56 ticks down from Friday's close as the market reacted to the ratings loss. - Reuters