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Gold added to a record breaking run, hitting a new high above $1,400 an ounce as investors sought safe havens in the face of a number of uncertainties, including the euro-area debt concerns and this week's G20 leaders' summit.

The euro has dropped 3 percent against the dollar from a 9- month high set last week and against the yen has slipped to a one-week low, although some forecast limited downside.

"We've probably seen a short-term top in the euro," said Grant Turley, strategist at ANZ in Sydney, adding it was a mild corrective move and unlikely to worsen unless concerns over the euro zone's sovereign debt intensify.

Ireland is the latest country to rattle the single currency, with Irish borrowing costs extending a month-long climb on worries about a political impasse in Dublin ahead of a budget vote.

The yield on Irish 10-year bonds hit 8 percent for the first time on Monday.

Adding to the market's cautious tone, top officials at the U.S. Federal Reserve offered differing assessments of the central bank's $600 billion bond-buying programme announced last week.

One argued it was an effective way to offset deflation risks and another warned it might need to be curbed to head-off inflationary pressures.

Another uncertainty for markets is a G20 leaders' meeting this week in South Korea, where currency tensions loom large.

"The market is also going to be wary ahead of G20 but I think they'll struggle to come up with any substantive plan," ANZ's Turley said.

Investors in stock markets, cautious after recent rises, chose to bank gains.

The benchmark Nikkei average .N225 fell 0.7 percent in early trade after the index had risen to a three-month high the previous day.

Shares in Japanese precision machinery makers, which depend on Europe for many of their sales, were among the biggest losers as investors worried a strong yen would crimp earnings.

"The yen's strength against the euro is inducing some selling pressure," said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.

The MSCI index of Asia Pacific shares outside Japan .MIAPJ0000PUS eased.

The U.S. Federal Reserve's new $600 billion bond-buying program has drawn global scorn because of concerns it will send a flood of cash into the world economy without doing much to reinvigorate a lackluster U.S. recovery.

Ma Delun, a deputy governor of the People's Bank of China, said he was concerned the Fed's spending spree may undermine efforts to balance out global growth.

The Fed's program "may add risks to the global economic imbalance, put pressure on emerging markets to adjust their international balance of payments and could also stir the formation of asset bubbles, all of which require our vigilance," Ma said in Beijing.

The Group of 20 rich and emerging economies meet here on Thursday and Friday and are eager to show they have not lost the cooperative spirit forged during the depths of the financial crisis in 2008.

Hosts South Korea hung huge banners from buildings around the convention center housing the summit proclaiming a G20 mission of "Shared Growth Beyond Crisis."

But growing discontent over foreign exchange rates and trade has exposed deep international rifts, while Ireland's worsening debt troubles have served as a reminder that the global economy remains vulnerable to financial turmoil.

If G20 leaders are unable to calm tensions this week, it could intensify investor concerns that global cooperation is giving way to national policies that may not be in the world economy's best interest.

High on the worry list is protectionism.

Although G20 finance leaders pledged last month to shun competitive currency devaluations, the Fed's bond-buying program has deepened concerns that the U.S. dollar is headed lower, driving up exchange rates in other countries.

China's tight grip on the yuan's rate means other fast-growing emerging markets such as Brazil end up taking the brunt of the currency adjustment.

World Bank President Robert Zoellick called for a new global currency system, perhaps with gold as a reference point. The idea drew criticism from many economists and there was no indication that it was on the G20's agenda this week.

Li Daokui, an academic adviser to China's central bank, said China wants a more "reasonable" global monetary system but its objective was not to replace the dollar with the yuan.

SECURITY TIGHTENS

Seoul raised its security alert to its highest level this week over concerns of violent anti-capitalist protests -- a common feature of summits involving the world's leading economies -- and worries rival North Korea may try to stage an incident to embarrass it.

South Korean President Lee Myung-bak, who will host a G20 leaders' summit in Seoul on November 11-12, hopes for agreement on specific targets to lower current account surpluses in export-oriented economies within a few months, Japanese business newspaper Nikkei reported on Tuesday.

The United States, which originally floated the idea of guiding China's current account surpluses to 4 percent of gross domestic product to reduce its reliance on external demand, has backed away from numerical targets after objections from China and other emerging economies.

"When it comes to specific numbers and the question of whether this will be decided at Seoul, we have to keep in mind that each country's circumstances are different," Noda said.

"It's more likely that countries will agree a common approach, and finance ministers from the member countries will debate the details later," he told reporters after a cabinet meeting.

G20 finance chiefs agreed last month in the South Korean city of Gyeongju to shun competitive currency devaluations and to adopt "indicative guidelines" for current account balances.

The guidelines are intended to achieve an often-debated goal of reducing excess consumption in countries that run current account deficits and encouraging domestic demand in exporters with large current account surpluses.

Policymakers have clashed over whether numerical targets are workable in the long term.

(Editing by Michael Watson)

The remarks from St. Louis Federal Reserve Bank President James Bullard, Dallas Fed chief Richard Fisher, Fed Governor Kevin Warsh and Thomas Hoenig of the Kansas City Fed underscored tensions within the central bank over the wisdom of the decision to buy a further $600 billion in government debt.

"While this policy carries both risks and rewards ... the benefits outweigh the risks," Bullard told a group of securities analysts in New York.

He said worries the policy could create high inflation down the road were "legitimate and important," but added that the disinflationary trend "is worrisome right now."

The central bank's decision has sparked an unusually vocal public debate among Fed officials, while drawing the ire of many other nations, which worry the United States is deliberately undercutting the dollar.

Warsh, who like Bullard backed the new Fed program in a vote last week, expressed concern about the decision. He said he would have preferred the adoption of "pro-growth fiscal, regulatory and trade policies" to spur growth.

Fisher said the program would only work if lawmakers addressed the fiscal and regulatory uncertainties that he said were holding back businesses from expanding.

"I would suggest that even if you share my cautious perspective on this matter, you might be assuaged by looking at this new initiative as a bridge loan to fiscal sanity," he told a meeting of financial professionals in San Antonio.

Warsh emphasized that the policy would be subject to regular review and adjusted if needed, and he raised the prospect that rising inflation risks could lead the central bank to curb the program even with unemployment still painfully high.

"If the recent weakness in the dollar, run-up in commodity prices and other forward-looking indicators are sustained and passed along into final prices, the Fed's price stability objective might no longer be a compelling policy rationale," he said.

"Policies should be altered if certain objectives are satisfied, purported benefits disappoint, or potential risks threaten to materialize," Warsh said.

However, Bullard said his best guess was that the full amount would be purchased by mid-2011, as announced. "Given the outlook now ... it looks like we will follow through on that and reassess at that point," he said in an interview with Market News International published on Monday.

CRITICS ABOUND

Many economists think the Fed could eventually decide to push beyond the $600 billion in purchases announced last week, notwithstanding differing views within the central bank.

Bullard said the U.S. recovery had slowed, putting it in a disinflationary trend that needed to be addressed to avoid a debilitating bout of deflation. He said the unconventional bond-buying program should prove as effective as traditional policy.

Two years after a severe credit crisis rocked the world financial order and unleashed a wave of reforms, the Securities Industry and Financial Markets Association opened its annual conference vowing to push for rules "that actually work."

"SIFMA will continue to work with the (Obama) administration, regulators and Congress to continue to restore faith and confidence in our financial markets, including effectively implementing the Dodd-Frank Act," said association President Tim Ryan at the opening of the conference.

SIFMA represents hundreds of securities firms, banks and asset managers, including Goldman Sachs and Bank of America.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law in July by President Barack Obama, touched every corner of the U.S. financial system and left many details to be worked out in months ahead by regulatory agencies.

Congress laid down some parameters for regulators on defining "proprietary trading," but left room for banks to retain some in-house trading operations in an area where drawing clear lines may be difficult.

Republicans who won control of the U.S. House of Representatives in last week's elections have vowed to try to roll back parts of Dodd-Frank, but face an uphill climb against continued Democratic Senate dominance and Obama's veto pen.

The Federal Reserve, the Treasury Department and other agencies are racing to complete hundreds of rules and studies mandated under Dodd-Frank, with lobbyists for banks and brokerages pushing to soften some provisions.

PROPRIETARY TRADING

Among these is the three-part Volcker rule, which curbs banks ability to trade for their own accounts unrelated to customer needs, known as proprietary trading; limits the involvement of banks with hedge funds and private equity firms; and sets a new cap on the domestic expansion capacity of the largest banks.

"The important aspect of this set of rulemaking will be how regulators define what activities are deemed 'proprietary' and thus prohibited, while ensuring that markets remain liquid and deep," Ryan said in his opening remarks.

"Our focus here is to help Treasury determine what qualifies as proprietary trading, and thus subject to the ban, and what is outside of the prohibition," Ryan said.

He also listed as a SIFMA priority influencing Dodd-Frank's ambitious mandates to impose the first federal regulation in history on the over-the-counter derivatives market, and to tag some big financial firms as "systemically significant."

Under the legislation, "systemically significant" financial giants would be put under tighter Fed oversight, while an "orderly liquidation" process for dismantling non-bank firms in distress would be led by the Federal Deposit Insurance Corp.

Both these aspects of the bill seek to combat the notion that some firms are "too big to fail" and to reduce the need for further taxpayer bailouts like those engineered in 2008 by the Bush administration at the height of the crisis.