The sell-off is far from a panic, but no one is sure how far it will go

The dollar slid against the yen and euro. Crude oil fell but steadied above $69 a barrel in New York, while metals such as copper weakened.

European stock markets had a mixed morning, after indexes closed lower in Asia and little changed in the US.

Investors said concerns persisted and further declines could still happen.

Rate of worry

The global sell-off has been driven by fears of higher interest rates and inflation in the US, driven by a weaker dollar and the end of a price bubble in commodities, investors said.

Oil, metal and share prices have recently powered to record levels as many people looked to gain exposure to a recovery in the US, Europe and Japan, as well as booming demand in developing nations such as China and India.

However, many investors are now questioning whether these levels are justified, especially as central banks will have to keep a tight rein on inflation.

John Kilduff, an analyst at Fimat USA, warned that market conditions may deteriorate further if the Federal Reserve, the US central bank, keeps increasing interest rates. It recently raised them to 5%, the 16th hike in a row.

Analysts are predicting that dollar weakness is here for some time

"If high commodity prices and the Federal Reserve continue to successfully stem economic growth, then we may be at the beginning of the end for this five-year price rally," he explained.

At the same time, there is growing speculation that the US favours a weaker dollar in order to boost exports and narrow a $700bn (�372bn) trade deficit with the rest of the world.

On Monday, the US welcomed the news that the Chinese currency, the yuan, was trading at below 8.00 to the dollar for the first time.

"Greater flexibility in China's exchange rate is something we've long advocated," said US Treasury Department spokesman Tony Fratto.

Shaky times

On Tuesday, the US dollar fell 0.2% to 110.24 yen in Europe.

Against the single European currency, the dollar made up some lost ground, trading at $1.2792 after some disappointing German economic data.

However, some analysts are predicting the dollar will slide to $1.30 against the euro over the next months.

Stock markets in Europe fell back in early trading after staging a brief opening rally.

France's Cac 40 index was down 0.1%, while Germany's Dax slid 0.3% and the UK's FTSE-100 was little changed.

Asian stock markets closed lower, with the Nikkei index of leading shares in Tokyo declining by 0.5%, while the Hang Seng in Hong Kong dropping by a further 0.9%.

Losing their shine

Commodity prices have surged in the past 12 months, as supply has struggled to keep up with demand. However, in the past few days, concerns have surfaced that gains have been overdone.

Companies have been investing to bring more crude oil online

Copper and aluminium slipped again after tumbling on Monday, even though gold rebounded.

Gold hit a spot low of $676.80 an ounce before bouncing back to $687.65, as investors and jewellery makers took advantage of low prices.

"The base metals suffered a rare sell-off on Monday morning and the action should be seen as a warning of what could lie ahead," said William Adams, an analyst at Basemetals.com.

Slippery slope

Crude oil fared less well, with a barrel of New York light trading at $69.35 in New York, 6 cents down from Monday's closing price.

In London, the key Brent Crude contract lost 12 cents to $69.55 a barrel.

At one point in early trading, New York light had dropped more than 6% during the past three sessions, and is still trading well below its April record of $75.35.

While many of the geo-political problems - such as the nuclear spat between the US, Europe and Iran - still remain, analysts said that supply concerns had eased.