The Australian Dollar has opened up this morning at 1.0438, as the weakness on international equity markets spreads, after attention was again focussed on the woes of the Eurozone on Friday.

Australia: Less than a day after President Obama's speech outlining a US$447B plan to create more jobs and stimulate growth in the US, the financial world focussed on the second resignation of a senior ECB executive, Jürgen Stark, who has disagreed with the ECB's policy of buying bonds of some ailing European economies.

This event and the subsequent sell off in European and US equity indices overshadowed the overall good news from Australia's largest trading partner, China, on Friday. China's trade surplus reduced to US$17.7b in August from July's US$31.5b, as iron ore and crude oil imports jumped, rising 30.2percent yoy.

Also supportive was a moderation in inflation, which fell to 6.2percent yoy in August from 6.5percent yoy in July, which indicates the soft landing the market was hoping for may be happening. The AUD could not escape the downdraft of weak equity markets, with some European markets down as much as 4percent and the Dow and S&P 500 both finishing 2.7percent lower. With the generally negative mood prevailing in equity markets, oil was down 2percent and gold relatively unchanged. Later this morning Australia's July trade data will be released and the market expects a surplus of A$1.9b as compared to last month's A$2.052b surplus as Queensland's exports of coal are still recovering from the impact of the natural disasters earlier this year. We expect the risk aversion trend to continue which may push the

AUD lower in the near term.

Majors: The Eurozone was the focus of concern on Friday as rumours circulated that a major ratings agency was to downgrade France's largest three banks due to their exposure to Greece and Germany was supposedly taking steps to strengthen their banking system against an inevitable Greece default.

The CDS market is pricing in a 92percent chance of a Greek default at the moment. The G7 weekend meeting yielded no further announcements about any direct action they might take. In this environment the EUR weakened to below 1.3600 as compared to the USD which propelled the AUDEUR cross rate close to its year high of 0.7700.

We expect the volatility to continue and AUD cross rates should continue to be firm as Greece drifts closer to default.