Tom Westbrook

SINGAPORE, (Reuters) – The dollar bounced after a Russian report about a mortar fire in Eastern Ukraine jangled market nerves. Investors fled to safer havens.

Russian-backed rebels claimed that Ukrainian forces had attacked their territory, in violation of international agreements aimed to end conflict in the contested Donbass region, according to the RIA news agency. This report was later discredited by Ukraine.

Russia has positioned more than 100,000 troops near Ukraine’s border. The West threatened Russia with sanctions if Russia attacked.

The euro dropped as low as 0.4% after traders realized the dangers of war. However, the denials of Ukraine as well as the fact that the attack was in contested territory helped to calm things down and the euro settled at $1.1354 last time.

After losing 0.6%, the risk-sensitive Australian currency settled 0.2% lower at $0.7185. Safe-haven currencies like the yen gained 0.1%, to 115.29 dollars.

Moh Siong SIM, Bank of Singapore strategist, said “There’s a lot of worry.” “It is not clear if this is a local or global event…right now such headlines make the markets nervous.”

Russian rouble fell 0.7%, as it has become more sensitive to war and sanctions.

One of the worst crises that has afflicted East-West relations in decades is the standoff on Europe’s eastern border. An American official stated earlier in the day that Russia is increasing its troop presence near Ukraine’s border rather than withdrawing as Moscow had claimed.

According to the official who spoke under anonymity, Russia can “launch any false pretext at anytime” in order to justify an invasion. Russia dismissed this statement.

Although safe-haven Treasuries rose and U.S. stocks futures dropped with it, the lack of clarity about the situation held back larger moves. [MKTS/GLOB]

It was 0.1% higher at 95.927

JAPAN DEFICIT

The dollar was also supported by economic data on Thursday. However, investors were disappointed with the overnight weakness caused by the Federal Reserve meeting minutes that showed a less optimistic tone than they had anticipated.

Japan’s largest trade deficit was recorded in January 2008, eight years after the European trade gap widened in December.

Expectations for rates held steady at the sterling.

New Zealand’s dollar last fell flat to $0.6685, after reaching a high of $0.6703 one week earlier.

A 25 basis point (bp) rate hike in New Zealand is fully priced for next week, with swaps trade pointing to a better-than-one-in-four chance of a 50 bps hike.

Expectations for March’s hike are still strong and was last stable at $1.3580.

Ahead on Thursday, speeches from Bank of Spain Governor Pablo Hernández de Cos and European Central Bank (ECB) chief economist Philip Lane at 0800 GMT and 1400 GMT, respectively, will be closely watched for clues on the ECB outlook.

James Bullard, President of the Federal Reserve Bank of St. Louis, speaks at 1600 GMT. U.S. Jobless Claims and the Philadelphia Fed Manufacturing Survey are also due.

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Price of currency bids: 0649 GMT

Description U.S. Close RIC Pct Change Pct High Low Bid

Changes made in the Past

Session

Euro/Dollar

$1.1357 $1.1373 -0.14% -0.10% +1.1385 +1.1323

Dollar/Yen

115.3100 115.4550 -0.11% +0.27% +115.5300 +115.1450

Euro/Yen

130.96 131.30 -0.26% +0.49% +131.4900 +130.4200

Dollar/Swiss

0.9223 0.9222 -0.02% +1.08% +0.9229 +0.9215

Sterling/Dollar

1.3581 1.3583 -0.02% +0.41% +1.3597 +1.3557

Dollar/Canadian

1.2709 1.2694 +0.15% +0.55% +1.2734 +1.2680

Aussie/Dollar

0.7189 0.7197 -0.13% -1.12% +0.7215 +0.7151

NZ

Dollar/Dollar 0.6686 0.6680 +0.10% -2.31% +0.6704 +0.6660

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