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Cyprus imposed restrictions on cash withdrawals and may curb the use of credit cards abroad to keep a rein on money flows after the country agreed to a bailout deal that will wipe out some senior bank bondholders and impose losses on large depositors. Cypriots are expected to besiege lenders in the morning.
The Italian government's cost of borrowing over five years rose to its highest since October at an auction on Wednesday, reflecting investor wariness over a lack of progress in forming a new government and worries about Cyprus's bailout. Italy's interest cost on new 10-year debt fell, however.
"Headline risks for the euro should persist, although a positive turn of events in either country would probably come as a greater surprise given the market's subdued expectations," said Vassili Serebriakov, strategist at BNP Paribas.
The euro was at $1.2777, hovering near a four-month low of $1.2750 touched on Wednesday, and was down 0.1% against the yen at 120.47, after hitting a one-month low of 119.945 the day before.
The dollar stood near Wednesday's 7-1/2-month peak of 83.302 against a basket of major currencies, helped by the weakness in the euro, which also suffered from further evidence of growth deterioration in the common currency bloc.
The MSCI's broadest index of Asia-Pacific shares outside Japan inched down 0.1% after touching a one-week high the previous session.
Australian shares slipped 0.4%, tracking a subdued session on Wall Street. They gained 0.9% the day before for their biggest percentage rise in nearly two weeks.
South Korean shares opened down 0.2%.
Japan's Nikkei stock average opened 0.3% lower.
Trading was expected to slow ahead of the Easter holidays.
European shares fell to a three-week closing low on Wednesday, pulled down by poor demand at the Italian auction, expectations of a bank run in Cyprus, and weak European data.
Data on Wednesday showed confidence in the euro zone economy fell more than expected in March after four straight months of gains, with other reports pointing to a slump in Italian manufacturing and retail sales and shrinking gross domestic product in France in the final quarter of 2012.
Fears about the euro zone boosted safe-haven assets, pushing benchmark 10-year US Treasuries yields down to more than three-week lows of 1.85% on Wednesday, below a technical resistance level, while lifting spot gold above $1,600 an ounce.
US crude futures inched up 0.1% to $96.67 a barrel.
