Dollar plummets to new six-month low

THE Australian dollar has fallen 1.5 US cents as nervousness grows that a summit of European leaders tonight won't make progress on a solution to the region's debt crisis.

At noon (AEST), the local unit was trading at 97.71 US cents, down from 99.20 cents yesterday.

In morning trade, it dropped as low as 97.41 US cents, the lowest level since November 28.

Commonwealth Bank currency strategist Joseph Capurso said negativity over the European summit and the possibility that Greece will leave the euro zone had pushed the dollar down.

"You've seen most currencies, except for the yen, falling against the US dollar, so it's a global move down in currencies," he said.

"The Aussie is simply part of that global move."

Mr Capurso said he expected there would be downward pressure on the Australian dollar for at least the next four weeks.

"The risks to the euro, the Greeks and the Aussie are still down. I certainly see the Aussie falling back no matter,"he said.

Tomorrow, the May HSBC purchasing managers index (PMI) from China will be released, as will the European PMI.

"The European ones are likely to be bad, and probably even worse than the previous month, and that would indicate to everyone that Europe is in recession," Mr Capurso said.

"So, the euro is likely to fall and the Aussie is likely to be dragged a bit lower as well."

Mr Capurso said he expected the Australian dollar to trade it a range between 97.00 US cents and 98.00 cents today.

Meanwhile, the Australian bond market was stronger at noon.

At noon (AEST), the June 10-year bond futures contract was trading at 96.895 (implying a yield of 3.105 per cent), up from 96.840 (3.160 per cent) yesterday.

The June three-year bond futures contract was at 97.610 (2.390 per cent), up from 97.520 (2.480 per cent). 

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