Italy's borrowing rates have soared to unsustainable levels with the yield on its 10-year government bonds hitting a record 6.676 percent on Monday, although it had eased slightly to 6.582 percent in Asia early Tuesday. "Politics are now keeping markets on edge," said Khoon Goh, strategist at ANZ bank in Wellington. "Greece may still be hogging the headlines at present, but we could be moving from a Greek crisis towards an Italian crisis if policymakers do not address the situation soon," he told Dow Jones Newswires. The Italy situation weighed on the euro in early Asian trade with the common currency dipping to $1.3741, compared with $1.3773 late Monday in New York and at 107.23 yen, from 107.52 yen. The dollar was at 78.05 yen, from 78.03 yen. In Italy, the 17-nation eurozone's third-largest economy, Prime Minister Silvio Berlusconi came under mounting pressure to resign over his handling of the country's economic troubles. In Greece however, the two main political parties were said to be on track to naming a new premier and unity government as world leaders pressed for Athens to quickly agree to a bailout deal and avert a crippling default. Tokyo stocks fell 1.27 percent, or 111.58 points, to 8.655.51 while Seoul shed 0.83 percent, or 15.96 points, to 1,903.14. But Sydney closed 0.48 percent, or 20.4 points, higher at 4,293.8 while in the afternoon Hong Kong rose 0.22 percent and Shanghai was 0.19 percent up. Wall Street saw a late rally on the Greece progress, with the Dow ending 0.71 percent higher, the Nasdaq up 0.34 percent and the S&P 500 gaining 0.63 percent. Under-pressure Berlusconi dismissed talk of his possible resignation as "baseless" and warned against calls for the creation of a national unity government like Greece, saying that it would be "the opposite of democracy". Berlusconi last week agreed to special oversight from the International Monetary Fund and European Union to ensure his government meets crucial targets to cut its $2.6 trillion debt. The country's low growth rate and the debt mountain have stoked investor fears that Italy could be the next to fall in Europe's ongoing crisis, which many fear could tip the world back into recession. Eyes are also on a critical parliamentary budget vote scheduled for 1500 GMT as Europe pressures Rome to implement long-promised economic reforms to avert a debt blow-up. In Tokyo the broader market was dragged down by a 29 percent slump for Olympus after the company said that a panel's probe into some of its past deals found they were used to cover up huge losses on investments in the 1990s. The camera maker has now lost 70 percent of its value since its British former CEO raised questions about four takeovers and the payment of massive advisory fees. On oil markets New York's main contract, light sweet crude for delivery in December, dipped 13 cents to $95.39 per barrel. Brent North Sea crude for December fell 21 cents to $114.35. At 0620 GMT gold was higher at $1,791.58 an ounce against $1,763.55 late Monday. In other markets: -- Taipei fell 0.27 percent, or 20.93 points, to 7,600.79. Chunghwa Telecom rose 0.6 percent to Tw$100.5 while Taiwan Semiconductor Manufacturing Co was 0.67 percent lower at Tw$74.5. -- Manila gained 1.00 percent, or 42.95 points, to 4,314.67. Philippine Long Distance Telephone Co. was up 1.87 percent at 3.27 pesos while San Miguel Corp. rose 1.01 percent to 119.20 pesos. -- Wellington closed 0.27 percent, or 9.05 points, higher at 3,351.24. Telecom gained 2.1 percent to NZ$2.69 and Fletcher Building gained 0.3 percent to NZ$6.52.