$A plummets amid more European trouble
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The Australian dollar has fallen one US cent and the euro has hit a record two-year low against the US dollar amid renewed fears about the European government debt crisis.
At 1700 AEST on Monday, the local unit was trading at 103.12 US cents, down from 104.09 cents on Friday.
The euro went as low as 120.85 US cents on Monday, its lowest point since June 2010.
Over the weekend, Spanish bond yields soared past seven per cent, pushing the cost of borrowing for the Spanish government to a level which is considered too high to be sustainable.
CMC Markets foreign exchange dealer Tim Waterer said the rise has put traders on the defensive and sold risk assets like the Australian dollar and the euro.
Equities were also sold off, the Australian share market fell 1.7 per cent and most Asian markets lost over one per cent.
"Traders around the globe appear to be suffering an all too familiar 'anxiety attack' on fears that Spain is on course for a financial calamity, and this sentiment was played out on the ASX200," Mr Waterer said.
The HSBC purchasing managers index manufacturing data for July will be released on Tuesday, which Mr Waterer says could put more downward pressure on the Australian dollar.
At 1700 AEST, the Australian currency was at 85.21 euro cents up from 84.90 euro cents on Friday and at 80.45 Japanese yen, down from 81.80 yen.
Meanwhile, Australian bond futures prices hit fresh all-time highs.
UBS interest rate strategist Matthew Johnson said troubles in Spain kicked off the weekend bond market rally.
He said Australian bonds are also being helped by a rally in US Treasury bonds after the President of the Reserve Bank of San Francisco John Williams said the unemployment rate would not drop unless the US Federal Reserve took action.
"So I guess that bonds are rallying because people feel like the Fed is going to ease monetary policy," Mr Johnson said.
At 1630 AEST on Monday, the September 10-year bond futures contract was trading at 97.305 (implying a yield of 2.695 per cent), up from 97.180 (2.820 per cent) on Friday.
The September three-year bond futures contract was at 97.900 (2.100 per cent), up from 97.760 (2.240 per cent).
Mr Johnson said market players will be keenly listening to a speech in Sydney on Tuesday by Reserve Bank of Australia (RBA) governor Glenn Stevens.