TOKYO - The euro slumped to multi-year lows Thursday on another turbulent day for stock markets, as fears grew that the global slowdown would hit Europe hard, dealers said.

The South Korean won also took a beating on rising concern that Asia's fourth largest economy would suffer disproportionately from a global downturn.

Contributing to the sharp fall on the Japanese equities market, the yen gained strength as investors who had binged on the low-yielding currency unwound their risky bets.

The euro slumped to 123.60 yen, a level not seen since December 2002. It rebounded to 124.57 in Tokyo afternoon trade, still well down from 125.82 in New York late Wednesday.

The single European currency slipped briefly to 1.2726 dollars, the lowest level since November 2006, down from 1.2867. "People are concerned about the financial crisis globally, especially in Europe. That tends to weaken the euro against the dollar," said Tomoko Fujii, head of economics and strategy at Bank of America in Tokyo.

The European Central Bank has room for several further interest rate cuts, which would mean the euro would no longer be as attractive compared with the dollar and yen, she said.

Fears over European economies grew Wednesday when Prime Minister Gordon Brown said the global economic downturn was "likely to cause recession? in Britain, echoing comments by Bank of England chief Mervyn King.

The British pound rebounded to 1.6275 dollars in Tokyo trade, after hitting 1.6139 dollars on Wednesday, the lowest level since September 2003.

"Everyone wants to say that the US economy is weak and that's true, but the surprise has been how weak the European economies are," said Patrick Bennett, currency strategist at Societe Generale in Hong Kong. Some dealers said the euro could still drop much more against the yen.

"The euro has been sold too much, but it looks like it will fall further because there are no factors to support it now," Masanobu Ishikawa, a manager at Tokyo Forex and Ueda Harlow, told Dow Jones Newswires.

The Japanese currency held on to its sharp recent gains against the dollar, which slipped to 97.44 yen, down from 97.79 in New York. The yen cracked the 100-to-a-dollar level earlier this week on risk aversion. The rise contributed to the sharp drop on equities markets Thursday as a stronger yen makes Japanese exports less competitive.

Official data released Thursday showed Japan?s trade surplus plunged 94 percent in September from a year earlier amid sluggish exports.

"What the trade data suggests is that when the markets stabilise and look back at fundamentals, I think that the yen will find it difficult to live at a level stronger than 100 to the dollar," Bennett said.

The South Korean won plunged to 1,409.45 to the dollar, down from 1,368.97 the day before. The dollar was also higher than other Asian regional currencies.

It climbed to 9,955 Indonesian rupiah from 9,825, to 34.665 Thai baht from 34.475, to 33.40 Taiwan dollars from 32.93, to 1.5019 Singapore dollars from 1.4980 and to 48.99 Philippine pesos from 48.66.