Dollar weakens as investors seek haven assets on concern over military tension in Ukraine

The New Zealand dollar weakened as investors favoured safe haven assets on concern about increased instability in the Ukraine after Russian troops moved into the region's Crimean Peninsula.

The kiwi slipped to 83.54 US cents at 8am in Wellington from 84.21 cents at the New York close and 83.24 cents at 5pm on Friday. The trade weighted index dropped to 78.50 from 78.85 on Friday.

Investors are turning to bonds, gold and the yen and moving out of higher risk investments in stocks and currencies such as the kiwi amid heightened geopolitical uncertainty after Russia sent troops into Crimea, which is dominated by Russian speakers, following an uprising which led to last month's overthrow of pro-Kremlin president Viktor Yanukovych. Ukraine has put its forces on combat readiness and said an invasion would be an act of war, while US president Barack Obama warned Russia not to intervene.

"Early trading this morning will be dominated by news that Russia effectively annexed the Crimean Peninsula," Bank of New Zealand currency strategist Raiko Shareef said in a note. "These actions will be negative for risk assets this morning, and the US dollar, Japanese yen and Swiss franc will likely benefit."

The New Zealand dollar dropped to 84.73 yen at 8am in Wellington from 85.42 yen at 5pm on Friday and fell to 73.53 Swiss franc from 74.54 franc.

In New Zealand today, traders are expecting the 10:45am release of fourth quarter terms of trade to remain strong.

Reports from China are due on official non-manufacturing PMI and HSBC manufacturing PMI while the US has an ISM manufacturing report.

The kiwi advanced to 93.92 Australian cents at 8am from 93.72 cents on Friday ahead of reports on Australian inventories, home sales and prices, and an inflation indicator. The local currency weakened to 60.67 euro cents from 61.24 cents on Friday after a report on Eurozone inflation beat forecasts, cooling expectations the European Central Bank would add further stimulus to the region when it meets this week. The local currency dropped to 49.93 British pence from 50.30 pence on Friday.

(BusinessDesk)