The euro fetched $1.4043 in Tokyo morning trading, down slightly from 1.4047 in New York late Monday. The single European currency fell to 114.88 yen from 115.13. The dollar fell to 81.80 yen from 81.96.

"A series of bad news prompted investors to shun the euro amid rekindled worries about deep-rooted debt problems," said Teppei Ino, analyst at the Bank of Tokyo-Mitsubishi UFJ.

"While selling of the euro calmed somewhat in Tokyo trading hours, the unit is seen to stay under pressure."

Fitch Ratings on Friday slashed Greece's credit rating by three notches to B+, citing its growing problems in getting its public finances in order.

The news came amid lingering speculation that Athens might have to restructure or reschedule its mounting debt.

Meanwhile Standard & Poor's lowered its outlook for Italy from "stable" to "negative."

HiFX Head of Trading Mike Hollows told Dow Jones Newswires that there is concern about contagion effects and "potential risks as rating agencies seem to be picking off sovereign nations one by one".

Meanwhile rising concerns emerged on Monday over the state of the European economic recovery -- with key indicators slowing sharply.

London-based research giant Markit's composite eurozone index for manufacturing and services output suggested eurozone growth slowed to a seven-month low in May.

Copyright AFP (Agence France-Presse), 2011