Aussie Lower On Threat Of Greek Debt Default

Aussie Lower On Threat Of Greek Debt Default

The Australian dollar was trading lower on Monday as concerns over the EU debt crisis were fuelled by the resignation of one of the European Central Bank’s executive board members.

The markets were curbed on Friday evening by rumors that Greece is likely to default on its debts and in need of financial assistance. In addition, chief economist Juergen Stark resigned from the ECB causing European and US equity markets to plummet.

At 0705 AEST on Monday, the Aussie was trading at $104.33 US cents, down almost two cents on Friday’s local close of $106.28 US cents. By 1603 AEST the Aussie had sunk even lower to $104.41 US cents as investors sentiment weakened.

Mike Burrows, currency strategist for Bank of New Zealand told Big Pond News that Europe is currently having the biggest impact on the Australian dollar:

'It's just all about Europe right now, following the resignation, there were rumors circulating that Greece may default over the weekend.

'Obviously that hasn't happened - but it was enough to make markets very nervous and make a spike in risk aversion.'

Overnight on Sunday the Greek finance minister announced budget cuts in the region of 2 billion Euros in exchange for a bail-out package from the IMF.  However, economists fear that this will not be enough to prevent the country from defaulting on its debt.

Mr Burrows said he expected the Greek debt crisis to weigh on the local dollar for the remainder of the week.