THE dollarwas 1.5 US cents lower at noon, as risk appetite continued to wane following concerns about Greece's economic future.
At 12:00 (AEDT), the dollar was trading at $US0.8663/66, down from yesterday's close of $US0.8813/15.
From 17:00 AEDT, the local unit traded between $US0.8638 and $US0.8693.
4Cast economist Michael Turner said the unit had been under sustained pressure since yesterday, when the domestic equity market closed down three per cent.
Fears over the economic health of Greece and potential economic problems in Portugal and Spain sparked a massive bout of risk aversion worldwide.
"The Aussie has been under the pump since yesterday," Mr Turner said.
"It headed into the offshore session on the back foot and just got hammered again."
Because it is a growth currency, the dollar responds to investor sentiment towards risk.
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Investors became spooked after a series of European countries posted larger than expected debt in recent weeks.
In a move to calm fears, the Greek government has proposed an austerity program to save more than one billion euros through benefit cuts and operational cost reductions in the public sector.
Overall, Athens aims to save over 10.3 billion euros this year with better tax collection, cost-cutting and reduced arms spending to lower the deficit to 2.8 per cent of output by 2012.
The measures seek also to stabilise Greece's debt.
But the poor mood continued to batter the local dollar and domestic and international share markets.
At 12:00 AEDT, the benchmark S&P/ASX200 index was down 2.77 per cent at 4493.8 points, while the broader All Ordinaries index had lost 2.81 per cent to 4513.7 points.
Meanwhile, shares in Spain and Portugal also plunged on public finance concerns.
The state of public coffers in the Iberian Peninsula have been causing growing unease, with investors fearing a scenario similar to that in Greece, which the European Commission placed under permanent fiscal surveillance on Wednesday.
Mr Turner said the moves were enough to keep the local unit depressed for the next few days.
The USDepartment of Labor is to publish its non-farm payrolls data for January in overnight.
"Markets are pretty nervous," Mr Turner said.
"Even with non-farm pay rolls tonight, I don't think people are going to be trying to buy the Aussie out of that."
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