Dollar little changed as Ukraine tensions test investor nerves

The New Zealand dollar was little changed in local trading as ongoing tensions in the Ukraine keep investors wary of moving currencies too far.

The kiwi traded at 85.78 US cents at 5pm in Wellington from 85.72 cents at 8am, and 85.70 cents on Friday in New York. The trade-weighted index increased to 79.78 from 79.64 last week.

Tensions between Western nations and Russia have been escalating on the geopolitical tussle for control over Ukraine, with an accord signed between Russia, Ukraine and the US reported to be on the brink of collapse. Russia's central bank was forced to raise interest rates on Friday to support the ruble after ratings agency Standard & Poor's cut the country's credit rating to one level above junk following capital flight from the country.

"Risk aversion at the moment is capping the Aussie and kiwi against the US," said Imre Speizer, market strategist at Westpac Banking Corp in Auckland. "People are loathe to sell the kiwi below 85.50 US cents and are not willing to take it back to the 87s while the Ukraine thing hangs around."

Westpac's Speizer has a neutral to slightly downward bias for the kiwi dollar this week.

A BusinessDesk survey of nine traders and strategists predicts the local currency may trade between 84.35 US cents and 87 cents this week. Six predict the kiwi will fall this week, while two pick it to remain largely unchanged and one expects a rise.

Traders may keep tabs on the Opposition Labour Party's monetary policy announcement tomorrow, which would end the bipartisan approach to New Zealand's inflation target for the central bank. Finance spokesman David Parker has said he plans to broaden the Reserve Bank's objectives and give it more flexibility to address issues.

The local currency was little changed at 87.60 yen from 87.63 yen on Friday in New York, and decreased to 92.36 Australian cents from 92.46 cents. It traded at 62.03 euro cents from 61.99 cents last week, and was little changed at 51.07 British pence from 51.03 pence.

(BusinessDesk)

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