* Euro sinks to all-time low of 1.1660 Swiss franc
* Euro hit as spread on Italian bonds widens sharply
* Dollar index benefits, marks 3-1/2 month high
By Chikafumi Hodo and Ian Chua
TOKYO/SYDNEY, July 12 (Reuters) - The euro was beaten down further in Asia on Tuesday, plunging to a record low versus the Swiss franc and sinking to a four-month trough against the dollar on growing concerns that the euro zone's sovereign debt crisis was spreading.
The single currency fell as low as $1.3932 -- its lowest since March 17 -- after a slew of stop-loss orders were triggered below $1.3980. The euro fell broadly, dropping to an all-time low of 1.1660 Swiss franc .
The euro was on the defensive as an emergency meeting by European financial officials failed to offer fresh measures to tackle the region's debt problems, dealers said.
Market participants were especially concerned about the debt of countries such as Spain and Italy, which came under strong selling pressure the day before.
"The market has become particularly concerned due to the sell-off in Italian bonds. A steep widening of the spread between Italian and German bonds is making the market worried," said Osamu Takashima, chief forex strategist at Citibank in Tokyo.
"The market was to a certain extent expecting the problems in Greece to spread to Spain, but this drastic move in Italian bonds was very surprising."
The spread on the 10-year Italian bond yield over that of German bonds widened to above 300 basis points the previous day from about 180 bps at the start of the month.
The euro was bought back against the Swiss franc by late Asian trade, trading down 0.1 percent at 1.1 716 franc
.
Against the yen, the euro was down 0.6 percent at 111.86 after falling as far as 111.67 -- the lowest since March 18.
Against the dollar, the single currency dropped 0.5 percent to $1.3959 .
Support is seen around $1.3905/10, a 50 percent retracement of the January-May rally as well as the 200-day moving average.
Global macro funds were detected selling the euro actively in Asia, traders said.
Some traders said the euro came under pressure as IMF Managing Director Christine Lagarde failed to comment specifically on resolving Greece's problems.
Lagarde said the IMF and its European partners are not yet ready to discuss terms of a second Greek bailout, urging Athens to do more to deal with its debt crisis.
In her first roundtable with Washington-based news agencies since taking the helm of the IMF a week ago, Lagarde said Greece had taken important steps to cut its budget deficit but that they were not enough.
Weakness in the euro helped push the dollar up against a basket of major currencies. The dollar index climbed as high as 76.370 -- its highest since April 1.
The dollar index was up 0.4 percent at 76.269.
"I feel that the euro zone debt situation particularly deteriorated after Portugal was downgraded to junk status last week. The market again started to focus on the debt problem as being a problem for the whole region," said Kimihiko Tomita, head of foreign exchange at State Street and Trust.
"The fact that the euro broke decisively below $1.4 is significant. The most recent selling appears to be a bit too rapid, but the market could test the euro further in the short term given current sentiment," Tomita said.
In a bid to stop financial contagion engulfing Italy and Spain, officials promised to provide cheaper loans, longer maturities and a more flexible rescue fund to help Greece and other EU debtors.
They declined to rule out the possibility of a selective default by Greece, a move officials said bolstered Germany's push to involve investors in easing Greece's debt despite the concerns of the European Central Bank.
European Union finance ministers meet later on Tuesday and are under the cosh to soothe market nerves ahead of Thursday's Italian bond auctions. Italy is aiming to raise 7.75 billion euros in the debt market, according to estimates from Barclays Capital.
The dollar fell 0.1 percent to 80.15 yen , pressured mainly by the yen's firmness against the euro, but the U.S. currency met solid bids slightly above 80 yen.
The Bank of Japan kept monetary policy on hold and gave a brighter assessment of the economy on Tuesday, encouraged by a rebound in factory output and increasing signs that the recovery from the devastating March earthquake is broadening.
Still, the market showed a muted reaction to the central bank's assessment towards the Japanese economy. (Additional reporting by Hideyuki Sano in Tokyo and Masayuki Kitano in Singapore; Editing by Joseph Radford)