THE dollar was more than one US cent lower at noon amid concerns about the credit worthiness of several European nation.
At 12pm AEDT, the Australian dollar was trading at $US0.8902/03, down 1.2 per cent from yesterday's close of $US0.9009/13.
Since7am AEDT, the local unit has traded between $US0.8963 and $US0.8885.
The local currency was last this low on December 30.
Fears Greece will default on its debt has raised concerns about the high level of indebtedness in other European nations such as Portugal.
A senior dealer with online currency trader Easy Forex, Francisco Solar, said fears about government debt levels in Greece along with disappointing earnings reports and economic data in the US lowered market appetite for high-yielding assets.
"That is weighing on the psyche of the markets and until we get some assurance that is being handled, unfortunately the euro is driving other currencies lower against the US," Mr Solar said.
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"Also, that the UK is not considered the lowest risk in terms of banking just rattled the market somewhat."
"Throw into the mix Portugal, Ireland and Spain, and unfortunately plenty of this negative sentiment has come at a time when earnings estimates in the US have not impressed."
The US Department of Commerce said durable goods orders rose at a slower-than-expected 0.3 per cent in December, and reminded the market the recovery in the American recovery was likely to be slow.
Financial markets had forecast durable goods orders to have risen by two per cent in the month.
Mr Solar said the weak sentiment on equity markets in Asia helped drag the Aussie lower in morning trade.
Australia's benchmark S&P/ASX200 index down 1.59 per cent, while Japan's Nikkei-225 index was 1.92 per cent lower.
For the rest of the Asian session, Mr Solar forecasts the Australian dollar to trade between $US0.8850 and $US0.8950.
"This flow-on from last night against the US dollar has really hampered things in Asia and lacking other cues, the Aussie is very much going to weaken," he said.
Meanwhile, the Australian bond market was firmer at noon.
At 12pm AEDT, the yield on the Commonwealth Government April 2020 bond was at 5.442 per cent, down from yesterday's close of 5.512, while the yield on the May 2013 bond was at 4.838 per cent, down from 4.985 per cent.
On the Sydney Futures Exchange, the March 10-year bond futures contract was at 94.540, up from yesterday's close of 94.460, while the March three-year bond futures contract was at 95.120, up from 94.980 previously.
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