Voters set to decide the nation's status in currency bloc

The euro weakened to an almost nine-year low and Asian stocks fell amid concern Greece will exit the European currency union. Oil slumped to its lowest level since 2009, while silver and Chinese shares climbed.

Greece's political parties have embarked on a campaign for elections this month that may determine the fate of the country's membership in the euro currency area, with Der Spiegel magazine reporting German Chancellor Angela Merkel is ready to accept a Greek exit.

Data this week will probably show consumer prices in Europe fell for the first time in five years in December, adding to the argument for European Central Bank President Mario Draghi to extend stimulus.

"The reasons to be selling the euro were pretty clear over the weekend: Draghi being a step closer to QE and deepening concerns about the Greek political situation," Sean Callow, a currency strategist at Westpac Banking Corp in Sydney, said.

"The euro was so close to such a keenly watched round number as $1.20 that we didn't need any fresh news to tip us over the cliff."

The euro was trading at $1.1951 after falling to $1.1862 on Monday, its lowest since December 2005.

It also extended its loss over the past year to 12 percent as euro-region and US monetary policy diverged. While the Federal Reserve has wound back its own bond-buying program and floated the prospect of raising interest rates from near zero, the ECB reduced rates and started asset purchases in a bid to stoke economic growth.

Draghi told German newspaper Handelsblatt last week that while deflation risks are "limited", policymakers "have to act against such risk".

Asked how much the ECB might spend on government bonds, he answered that it is "difficult to say".

The pound dropped to its weakest level since August 2013, the Swiss franc lost 0.5 percent, and the New Zealand dollar declined 0.8 percent.

Consumer staples and telecom stocks led declines on MSCI's Asian Pacific index, while energy shares gained. The Kospi lost 0.4 percent in Seoul and Taiwan's Taiex Index retreated 0.6 percent. Japan's Topix was little changed. The Shanghai Composite Index climbed 3.6 percent, extending its rally over the past six months to 61 percent. Hong Kong's Hang Seng Index fell 0.57 percent.

West Texas Intermediate crude slipped to $51.77 a barrel after capping a sixth straight weekly loss on Jan 2. Brent crude traded in London fell 1.5 percent to $55.58 per barrel, with both blends headed for their lowest settlement levels since 2009.

WTI and Brent tumbled more than 40 percent last year as the highest US oil output in about 30 years collided with slowing global demand and OPEC's reluctance to reduce its own production.

Iraq plans to boost crude exports this month, according to the oil ministry in the second-largest producer of the Organization of Petroleum Exporting Countries.

Jan 25: triumph or tragedy?

Greece's political parties have embarked on a flash campaign for elections in less than three weeks that Prime Minister Antonis Samaras said will determine the fate of the country's membership in the euro currency area.

Samaras used a Friday speech to warn that victory for the main opposition Syriza party would cause default and Greece's exit from the 19-member euro region, while Syriza leader Alexis Tsipras said his party would end Germanled austerity.

Der Spiegel magazine reported German Chancellor Angela Merkel is ready to accept a Greek exit, a development Berlin sees as inevitable and manageable if Syriza wins, as polls suggest.

The high-stakes run-up to the Jan 25 vote returns Greece to the center of European policymakers' attention as they strive to fend off a return of the debt crisis that wracked the region from late 2009, forcing international financial support for five EU countries.

While Greek 10-year bond yields rose to about 9 percent last week from a post-crisis low of 5.57 percent in September, the relative improvement in yields from Italy to Ireland suggests that the contagion has been contained.

"Many European officials believe a Greek exit would be manageable and in contrast to 2010-2011 we wouldn't see the same cascading effect on countries like Spain or Ireland," said Fredrik Erixon, director of the European Centre for International Political Economy in Brussels.

Erixon said it is realistic to expect greater flexibility in Germany and other euro members regarding Greece as they now have more lee-way given that the crisis has cooled.