On Monday, the single currency euro and world shares fell sharply after reports that the indebted regions of Spain required help fueled concerns that the country may very soon become the fourth euro zone member to ask for a major bailout.
U.S. stocks were poised to join the selloff with futures prices suggesting a much lower opening on the Wall Street. The single currency fell 0.6 percent to $1.2082, its lowest level since June 2010.
It was reported by Spanish media that up to six regions could seek aid from the central government after Valencia asked for funds this Friday, which sent yields on all Spanish government bonds sharply higher and 10-year debt to a euro-era high of over 7.5 percent.
"Given the market reaction on the back of the news that more and more regions are looking to tap in to the liquidity fund..., it will be very difficult for Spain to circumvent further support for itself," said Norbert Aul, a rate strategist at RBC Capital Markets.
According to Reuters data, Spain must make coupon and redemption payments to bondholders totaling 20 billion euros ($24.3 billion) next Monday, followed by nearly 25 billion euros in October.
Spain does not need a full sovereign bailout such as the ones taken by Greece, Ireland and Portugal to stay afloat, Economy Minister Luis de Guindos said.
On Monday, the Bank of Spain said the Spanish economy had sunk deeper into recession in the second quarter, contracting at an annualized rate of 1 percent.
"What began as a Spanish banking bailout looks to be moving rather quickly towards a possible sovereign bailout. Overlay that with increasingly negative news on Greece and you get a fairly negative mix, so the path of least resistance for the euro is down," said Jeremy Stretch, currency strategist at CIBC.