The euro has dropped to its lowest rate against the dollar in 16 months after France sold 8bn euros ($10.3bn, £6.6bn) of bonds at an auction.
(BBC NEWS) London - The euro fell to $1.2831 against the dollar and was at an 11-year low versus the yen.
France paid an interest rate of 3.29% to borrow for 10 years, up from 3.18% at the last sale in December.
Many investors fear that France is poised to lose its top credit rating, making it more expensive to borrow.
Markets were also unsettled after Luis de Guindos, Spain's economy minister, told the Financial Times that its banks may face up to 50bn euros in new bad loans - higher than previous public estimates by the government.
Later on Thursday, Spain will unveil more austerity measures.