* Yen and Swiss franc benefit from safety flows
* Euro weighed down by comments from ECB's Draghi
* Focus back on Ukraine as Crimea referendum looms
By Ian Chua and Shinichi Saoshiro
SYDNEY/TOKYO, March 14 Safe-haven currencies
like the Swiss franc and the yen were in demand on Friday,
having surged overnight as tensions in Ukraine flared up and
worries about the health of the Chinese economy continued to
Russia launched new military exercises near its border with
Ukraine on Thursday, showing no sign of backing down on plans to
annex its neighbour's Crimea region. U.S. Secretary of State
John Kerry said serious steps would be imposed by the United
States and Europe if the referendum on Crimea joining Russia
takes place on Sunday as planned.
"With the approach of Sunday's referendum in Crimea, reports
of Russian troop movements near the Ukraine border and
escalating warnings of Western sanctions all contributed to
renewed anxiety," analysts at BNP Paribas wrote in a note to
The dollar stood at 101.81 yen, having fallen sharply
from Thursday's peak of 102.865. The euro traded at 141.14 yen
well below a high of 143.38 yen hit on Thursday.
"The dollar and euro had been stuck in a narrow range for a
while, and positions tend to build up in such an environment.
When stops are triggered under those conditions, currency
movements tend to be volatile," said Bart Wakabayashi, head of
forex at State Street in Tokyo.
"The situation in Ukraine is worrying but the world has not
changed dramatically since Monday, with chances of heavy Russian
military involvement in Crimea still appearing limited,"
Against the Swiss franc, the dollar traded at 0.8752 francs
, having plumbed a 2-1/2-year low of 0.8698 francs.
Market sentiment was already fragile after another batch of
disappointing Chinese data on Thursday reinforced fears of a
slowdown in the world's second-biggest economy.
Investors took cover in highly rated government bonds while
dumping riskier assets, with Wall Street slumping more
than 1 percent.
The euro was further undermined by comments from European
Central Bank President Mario Draghi, who said the strength of
the currency was increasingly relevant to the bank's assessment
of price stability as it was having a negative impact on
Speaking at an awards ceremony in Vienna, Draghi said the
bank has been preparing additional policy steps to guard against
deflation taking hold in the euro zone.
The euro staged a dramatic reversal on those comments,
retreating to $1.3867 from a 2-1/2-year high of $1.3967.
Market participants are waiting to see if the U.S. producer
price index and the University of Michigan sentiment index on
Friday offer further evidence that the economy is regaining
strength, following solid retail sales and employment data on
Commodity currencies, usually sold in times of heightened
risk aversion, also came under pressure. That took the shine off
the Australian and New Zealand dollars.
The Antipodean currencies had been star performers on
Thursday with the Aussie lifted by surprisingly strong jobs
data, while a hike in New Zealand interest rates and talk of
more to come gave the kiwi a solid boost.
The Aussie last stood at $0.9034, having pulled
back from a one-week high of $0.9104, while the kiwi was knocked
back to $0.8548 from an 11-month peak of $0.8607.