WELLINGTON (Reuters) - The yen rallied to a three-week high against the U.S. dollar on Monday while the Australian and New Zealand dollars stumbled as escalating political tensions in Ukraine prompted investors to dump higher-risk currencies in favor of lower-risk, liquid ones.
Ukraine mobilized for war on Sunday while the United States and European countries condemned steps taken by Russia to use military force in its politically vulnerable neighbor in what could become Moscow's biggest confrontation with the West since the Cold War.
"It's a reaction to the escalation in tension in Ukraine over the weekend ... the traditional risk proxies are getting hit, and the safe havens getting bid," said ANZ currency strategist Sam Tuck in Auckland.
Growing geopolitical risks pushed the U.S. dollar down to around 101.30 yen in early Australasian trade, its weakest since early February and down from around 101.80 late on Friday. The low-yielding yen tends to appreciate during periods of global uncertainty.
The euro skidded to a near 14-month low around 1.2095 Swiss francs. The franc, which is widely considered the safest of the G10 currencies, traded at 0.8795 per U.S. dollar, holding near 0.8775 francs hit late last week, its strongest since late 2011.
The euro slipped to around $1.3755 from around $1.3800 late on Friday, and analysts said the euro could come under more selling pressure on risks that tensions between Russia and European countries could disrupt gas supplies from Russia to Europe via Ukraine.
"Monday should bring a lower bund yield and EUR/USD at least to discount the ordinary risk scenario of another supply interruption," JPMorgan analysts said in a note.
Investors dumped the higher yielding Antipodean currencies, pushing the Aussie to a three-week low of $0.8891, retreating from $0.8990 hit on Friday, while it stumbled to around 90.10 yen, also its weakest since early February.
The kiwi fell to $0.8348, knocked off a high of $0.8428 hit late last week. Against the yen, the kiwi slipped to around 84.65 yen.
Analysts said the relatively illiquid Aussie and kiwi, which tend to sell off during periods of risk aversion, could fall further against the yen if the situation in Ukraine deteriorates further.