Australian dollar drops with bad news from Europe

THE Australian dollar was two thirds of a US cent lower, following news that Portugal's government debt had been downgraded to junk status.

THE Australian dollar was two thirds of a US cent lower, following news that Portugal's government debt had been downgraded to junk status by ratings agency Moody's.

At 7am (AEST) today, the dollar was trading at 107.12 US cents, down from 107.77 US cents on Friday afternoon.

Since 5pm on Friday, the local unit traded between 107.03 US cents and 107.84 US cents.

ANZ senior markets dealer Alex Sinton said the Australian dollar followed the euro to be softer over the weekend, after news that Moody's had cut Portugal's government bond rating to junk on Friday.

"The European Union is having some meetings on Sunday and they're deemed by markets to be emergency meetings and that's got the euro on the back foot," Mr Sinton said.

Australia's federal government on Sunday announced a fixed carbon price of $23 per tonne to begin on July 1, 2012.

Mr Sinton said traders were still digesting the details released by the government.

"I think most in the market will just try and wade through all of that (detail) and find out what it actually means to their businesses."

He said the Australian dollar may trade between 106.70 US cents and 107.65 US cents.

Today, the Australian Bureau of Statistics releases housing finance data for the month of May.