FOREX-Dollar gains on tensions between Russia, Ukraine

Reuters

* Dollar index up on geopolitical concerns * U.S. new home sales data boosts dollar * Dollar flat against yuan after yuan's slide By Sam Forgione NEW YORK, Feb 26 (Reuters) - The dollar rose on Wednesday to its highest in two weeks against a basket of major currencies as investors sought the greenback's safety on continued geopolitical tension between Russia and Ukraine.

President Vladimir Putin put Russian combat troops on high alert for war games near Ukraine on Wednesday, the Kremlin's most powerful gesture yet after days of saber rattling since its ally Viktor Yanukovich was toppled as president in Kiev.

"Geopolitical risk increased risk aversion, and investors are going into the dollar as a safe haven," said Charles St-Arnaud, currency strategist at Nomura Securities in New York.

In afternoon trading, the dollar index was up 0.34 percent to 80.412. Earlier it hit a high of 80.524, it strongest level since mid-February.

The dollar also rose against the euro, which was down 0.44 percent at $1.3685 after hitting a two week-trough of $1.3584. Analysts said concerns surrounding Russia and Ukraine weakened the currency.

The greenback extended gains versus the euro after data showing sales of new U.S. single-family homes surged to a 5-1/2-year high in January, easing concerns of a sharp slowdown in the housing market.

Against the yen, the dollar was up 0.11 percent at 102.36 .

The dollar also gained on expectations Federal Reserve Chair Janet Yellen will reassure traders that the U.S. central bank will not pause tapering its bond-buying program when she testifies before the Senate Banking Committee on Thursday.

The dollar, meanwhile, traded mostly flat against the yuan after the Chinese currency slid in recent days. It was last at 6.1248 yuan, compared with levels closer to 6.0600 just a week ago Analysts said the decline was engineered by the People's Bank of China to help soften a slowdown in the Chinese economy, with signs this week of a cooling of property prices.

Spot yuan has entered a dramatic weakening cycle in recent weeks, guided downward by a series of weak fixings by the central bank, with momentum to the slide boosted by the unwinding of yuan positions by Chinese banks. The yuan had its biggest drop in three years on Tuesday.

The yuan stabilized on Wednesday ahead of the Chinese government's official report on manufacturing on March 1, which could surprise to the upside and strengthen the currency, said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

Many market watchers see the move as a prelude to a widening of the yuan's trading band and believe the currency's longer-term uptrend remains intact, despite recent data showing growth in the world's second-biggest economy is losing steam.

"Traders bought back in on the view that conditions remain in place for yuan appreciation over the longer term," said Manimbo of Western Union.

View Comments (0)