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Tensions hit the dollar

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The Australian dollar is weaker as escalating tension between the Ukraine and Russia dilutes appetite for riskier assets.

Early Monday, the local unit was trading at 89.01 US cents, down from 89.56 cents on Friday.

Global markets are shying away from riskier assets after the Russia threatened to invade Ukraine, leading to the interim government in Kiev to put its troops on high alert, Bank of New Zealand strategist Kymberly Martin said.

Russia’s parliament on Saturday voted to allow Putin to send troops into its western neighbour.

“The developments in the Ukraine has created a broader risk-aversion in markets,” she said.

“The prospect of it deteriorating in that region and the fact Russia has voted to move into the Crimea peninsular has made people nervous and markets don’t like periods of uncertainty.

“That’s why not only the Aussie but also the New Zealand dollar, which is also a risk-sensitive currency, has opened lower.”

She said weaker-than-expected Chinese manufacturing figures had also dragged the Aussie down.

In another sign the economy of Australia’s largest trading partner is weakening, China’s purchasing managers index for February tumbled to 50.2, the National Bureau of Statistics said on Saturday.

A figure above 50 indicates expansion, but the lower the number the slower the growth.

This marked China’s 17th consecutive month of manufacturing growth but at a slowing rate – the lowest since a June reading of 50.1.

 

 

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