The New Zealand sharemarket fell to its lowest point in nine months after turmoil on overseas markets spread to Asia.
The Kiwi also slumped to a 10-month low against the US dollar.
The benchmark NZX 50 was down as much as 2.6% around lunchtime, but made some gains during the afternoon to close 2% down.
The Japanese market was down 2.5% in early Friday trading, while South Korean shares were down nearly 2%.
The slumps followed steep falls on Wall Street overnight as concerns over the European debt crisis continued to mount, with investors worried about a seeming lack of unity among euro zone leaders in addressing it.
The New Zealand dollar was buying 67.5 cents shortly before 5pm on Friday after dropping to a 10-month low of 66.1 at 8am.
The Kiwi gained on Thursday after Standard & Poor's reaffirmed New Zealand's AA credit rating following the Budget.
That was short-lived as markets reacted badly to Germany's move to restrict speculators betting on further market falls.
Shares on Wall Street closed down nearly 4%.
Comparison with Lehman Bros
Currency strategist Derek Rankin says there is a real fear that the European debt crisis will spread.
He says the situation is similar to when the Lehman Brothers financial services firm collapsed in 2008, with prices collapsing as investors try to pull all their money out at once.
Mr Rankin says global currency investors are placing their money in safe haven currencies such as the greenback and the Japanese yen.
The Kiwi continues to rise against the Australian dollar and is up more than 4% over the last three weeks.
Mr Rankin says larger amounts of money are being pulled out of Australia and this is hitting its currency harder.
