The Australian dollar has plunged to its lowest level in almost six months as concern deepens about the eurozone debt crisis.

On Friday, the local currency went as low as 97.95 US cents, its lowest since November 29 against the US dollar.

At 1700 AEST, the Australian dollar was trading at 98.25 US cents, down from 99.47 cents on Thursday.

It was also buying 78.1 yen, 77.6 euro cents, and 62.4 pence.

Interest rate futures are now betting that the Reserve Bank is an odds-on favourite to repeat its 50 basis-point cut to the cash rate when it meets next on June 5.

Easy Forex currency trader Tony Darvall said the currency market was paying particular attention to a comment by ANZ chief executive Mike Smith, who said that credit markets were closing in Europe.

When that happens, it becomes harder and more expensive for banks to find the money they need to lend to customers.

"People are wary, people are very scared," Mr Darvall said.

"That's why you're seeing stock markets under pressure and Australian banks under pressure."

Australian shares dropped to their lowest level for six months on Friday, and most Asian share markets were down over two per cent and the euro hit a four-month low against the US dollar.

Shares in the four largest Australian banks all fell over three per cent.

Mr Darvall said the focus during the offshore session on Friday night would be on any news about the Spanish banks, after ratings agency Moody's downgraded the debt ratings for 16 of them.

Another ratings agency, Fitch, downgraded the credit rating of Greece, which installed an interim government overnight ahead of fresh elections next month.

"You're going to need a pretty big announcement to turn things around," Mr Darvall said.

"That announcement could come from the G8, which meets this weekend.

"It's likely selling (in the Australian dollar) will continue, with little bouts of profit-taking."

At 1700 AEST, the Australian dollar was at 77.88 Japanese yen, down from Thursday's close of 79.91 yen, and at 77.59 euro cents, down from 78.14 euro cents.

Meanwhile, Australian bond futures prices pushed to new record highs.

JP Morgan interest rate strategist Sally Auld said the Spanish bank downgrades had added to the existing negative sentiment.

"The bank downgrades for Spain were expected because Moody's had a whole list of banks that they're going through, so it was Italy first, then Spain," she said.

Ms Auld said the market was looking for news of decisive action from euro zone leaders.

"We're getting close to a point where policymakers just can't sit back and risk a genuine finance-system event," she said.

On Friday afternoon, the 10-year bond futures contract hit a record high of 96.965 (implying a yield of 3.35 per cent).

At 1630 AEST on Friday, the 10-year bond futures contract was trading at 96.965 (3.035 per cent), up from 96.780 (3.220 per cent) at Thursday's close.

The June three-year bond futures contract was at 97.620 (2.380 per cent), up from 97.380 (2.620 per cent) previously.

The Reserve Bank of Australia's trade weighted index fell to 73.7 on Friday, from 74.6 on Thursday.

AAP