Dollar down on eurozone fears

THE dollar has plunged to its lowest level in almost six months as concern deepens about the euro zone debt crisis.

THE dollar has plunged to its lowest level in almost six months as concern deepens about the euro zone debt crisis.

The local currency went as low as 97.95 US cents, its lowest since November 29 against the US dollar.

At 5pm (AEST), the dollar was trading at 98.25 US cents, down from 99.47 cents yesterday.

Easy Forex currency trader Tony Darvall said the currency market is paying particular attention to a comment by ANZ chief executive Mike Smith, who said credit markets were closing.

When that happens, it becomes harder and more expensive for banks to find the money they need lend to customers.

"People are wary, people are very scared," Mr Darvall said.

"That's why you're seeing stock markets under pressure and Australian banks under pressure."

Australian shares dropped to their lowest level for six months today, and most Asian share markets are down over two per cent and the euro hit a four-month low against the US dollar.

Shares in the four largest Australian banks all fell over 3 per cent.

Mr Darvall said the focus during the offshore session tonight would be on any news about the Spanish banks, after ratings agency Moody's downgraded the debt ratings for 16 of them.

Another ratings agency, Fitch, downgraded the credit rating of Greece, which installed an interim government overnight ahead of fresh elections next month.

"You're going to need a pretty big announcement to turn things around," Mr Darvall said.

"That announcement could come from the G8, which meets this weekend.

"It's likely selling (in the Australian dollar) will continue, with little bouts of profit-taking."

The Reserve Bank of Australia's trade weighted index fell to 73.7 today, from 74.6 yesterday.