Australian dollar drops as fear of eurozone debt crisis contagion spreads

THE Australian dollar was trading almost half a US cent lower today, as investors worry that Europe's debt crisis is spreading to Spain and Italy.

THE Australian dollar was trading almost half a US cent lower today, as investors worry that Europe's debt crisis is spreading to Spain and Italy.

At 7am (AEST) today, the dollar was trading at 106.56 US cents, down from 107.00 US cents yesterday afternoon.

Since 5pm yesterday, the local unit traded between 106.31 US cents and 107.14 US cents.

Eurozone finance ministers kicked off critical talks on a new rescue package for Greece on Monday, and were under pressure to overcome differences over a second Greek bailout to ease a threat of contagion to its third and fourth biggest economies, Italy and Spain.

The euro fell on markets as Italian stocks plunged four per cent and borrowing costs rose to 12-year euro-era record highs in Spain and Italy.

"The Australian dollar has also come off a bit overnight on ongoing concerns about the euro debt crisis," said Mike Burrowes, currency strategist for Bank of New Zealand.

Locally today, National Australia Bank (NAB) is due to release its monthly business survey for June.

Mr Burrowes said investors would probably be more focused on any new developments from Europe.

He expected the local unit to trade between 106 US cents and 107 US cents on today.