Dollar falls after Italy, Spain downgrades

THE Australian dollar was slightly lower after a credit downgrade for Italy and Spain dampened market optimism.

THE Australian dollar was slightly lower after a credit downgrade for Italy and Spain dampened market optimism.

At 7.00am (AEDT) today, the Australian dollar was trading at 97.39 US cents, down from 97.75 cents on Friday.

Since 5.00pm (AEDT) on Friday, the local unit traded between 97.34 US cents and 98.79 cents.

The Australian dollar gained ground early on Saturday morning, Australian time, after US non-farm payrolls data showed the world's largest economy added 103,000 jobs in September, which was better than markets forecasts.

However, market sentiment soured after the Fitch agency downgraded its sovereign credit rating for Italy and Spain on Friday and said its long-term outlook for both countries was negative, citing high debt and poor prospects for growth.

The reports come at a time when the Eurozone is trying to contain a government debt crisis that has already seen three countries bailed out - Greece, Ireland and Portugal.

Italy and Spain are widely considered too big to rescue.

Westpac New Zealand senior market strategist Imre Speizer said another bout of bad news from Europe did not help the Australian dollar.

"The Australian dollar is under pressure, pretty much like all risk assets," Mr Speizer said from Auckland.

"The Aussie is down and, again, negative European news was the primary driver."

Mr Speizer said news on the European government debt crisis would be the main driver for markets this week.

"I think it'll still be heavily focused on," he said.

Locally, on Monday, the ANZ jobs ads figures for September are due for release.

Mr Speizer said he expected the Australian dollar to trade in a range between 96.00 US cents and 98,20 cents today.