Dollar falls on renewed euro concerns

THE dollar is trading almost one US cent lower on renewed worries about the eurozone debt resolution after Greece said it would hold a referendum on accepting a second bailout package.

THE dollar is trading almost one US cent lower on renewed worries about the eurozone debt resolution after Greece said it would hold a referendum on accepting a second bailout package.

At 5pm today the local unit was trading at 103.64 US cents, down from 104.47 US cents on Tuesday.

The move, by Greek Prime Minister George Papandreou to call for a referendum on a European rescue plan, renewed fears that Greece could default on its debt and that the eurozone government debt crisis could deepen.

Nomura chief economist Stephen Roberts said the news led to the Australian dollar trading lower.

"The concern is that it elongates worries about Europe and there's an issue with the referendum that you could get a disorderly exit of Greece from the EU (European Union)," Mr Roberts said.

"There's also political uncertainty in the near term about whether the Greek government is going to hold up and commit to the type of cuts that are needed to get the assistance.

"It just added a level of uncertainty into the European issue again."

He said the overnight focus would likely be on a meeting of the the Federal Open Market Committee (FOMC), the policy-making arm of the US Federal Reserve.

"Traders will be watching what the Fed says about the current state of the US economy - they'll probably still be relatively downbeat.

"They'll have full revisions to their range of economic forecasts - there will probably be some downgrading to those."

Since 5pm AEDT, the domestic currency has traded between 102.82 US cents and 103.68 US cents.

The RBA's trade weighted index was at 76.1 today, down from 76.6 yesterday.