Dollar lower after Greek vote announcement

THE Australian dollar is more than one US cent lower after markets overnight were shocked by news that Greece will hold a referendum on accepting a second bailout package from its Eurozone partners.

THE Australian dollar is more than one US cent lower after markets overnight were shocked by news that Greece will hold a referendum on accepting a second bailout package from its Eurozone partners.

At midday (AEDT) today, the Australian dollar was trading at 103.19 US cents, down from 104.47 cents yesterday.

Since 7am (AEDT) today, the local unit traded between 102.82 US cents and 103.45 cents.

Yesterday, Australian time, Greek Prime Minister George Papandreou announced the decision to call for a referendum on a European plan to rescue his country's economy.

The move renewed fears that Greece could default on its debt and that the eurozone government debt crisis could deepen.

CMC Markets foreign exchange dealer Tim Waterer said the vote on the bailout package was a surprise for markets.

"The Australian dollar was battered last night due to do the news about Greece and the referendum didn't bode well for a risk currency like the Australian dollar," he said.

"We also had commodity prices on the slide as well. The Australian dollar, being a commodities currency, suffered the wrath of that move lower.

"There's a chance if there's a bit of urgency from Greece ... then we could see markets start to shake off this recent negativity and go a bit higher."

Just before noon, the Australian dollar moved back above the 103.00 US-cent mark after a Greek government spokesman said the referendum would be held as soon as possible.

Mr Waterer said he expected developments on Greece's acceptance of the bailout package and news about the weekend's G20 meeting to be the main drivers for markets this week.

Meanwhile, Australian bond prices were higher at noon.

At midday (AEDT) today, the December 10-year bond futures contract was trading at 95.705 (implying a yield of 4.295 per cent), up from 95.565 (4.435 per cent) yesterday.

The December three-year bond futures contract was at 96.340 (3.660 per cent), up from 96.220 (3.780 per cent).