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Dollar down on Russia tensions

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The Australian dollar is lower as the European Union and the US prepare to impose sanctions on Russia after a referendum on the fate of Crimea went ahead despite Western opposition.

Early Monday, the local unit was trading at 89.96 US cents, down from 90.03 cents on Friday.

Crimeans have voted to allow Russia to annex the region from Ukraine, a vote that the West has described as illegal.

BK Asset Management managing director Kathy Lien says more tension in Eastern Europe will be bad for financial markets.

“Investors will not respond positively to increased geopolitical tensions,” she said.

“Russia probably won’t react immediately to a vote (for Crimea) to join the Federation, so the follow-through could last for days as they decide whether to take military or political action.”

Lien said the Australian dollar also was coming under additional pressure because of worries about the Chinese economy.

“Any enthusiasm caused by stronger domestic data has been offset by the slowdown in China’s economy and the persistent decline in copper prices,” she said.

“While copper is not as important as iron ore for Australia, it is oftentimes viewed as an indicator of Chinese demand and growth because they are the world’s largest consumer of the commodity.”

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