The US dollar edged up on Wednesday as the latest developments in the Ukraine crisis dampened investors' appetite for risk, as a sell-off in equity markets helped boost safe-haven bids for the greenback.

After spending the early part of the day lower, the dollar started to strengthen as the situation in Ukraine improved and US stocks shed early gains, and the US State Department said a full-scale Russian invasion of Ukraine was still a possibility.

The United States and its allies are rolling out more sanctions against Russia, with the EU measures taking effect on Wednesday. The Russian ruble was down 2.70% versus the greenback at 81.13 after hitting 81.392 per dollar, returning gains made on Tuesday.

The greenback has weakened recently as tensions in Ukraine have escalated, fueling speculation that the US Federal Reserve may be less aggressive in policy tightening at its March meeting.

Expectations for at least a 50-basis point rate hike have fallen to around 31% from around 45% a week ago, according to the CME FedWatch Tool.

Several Currencies Move Higher on Ukrainian Sentiment

The New Zealand dollar jumped after the Reserve Bank of New Zealand raised interest rates and said further tightening may be needed. The kiwi was last up 0.59% versus the greenback at $0.677.

A rise in the New Zealand dollar, along with a rise in crude oil prices, also helped other commodity-linked currencies such as the Canadian dollar and Australian dollar. Both Brent and West Texas Intermediate are up more than 1% on the day.

The Canadian dollar was up 0.22% versus the greenback at 1.27 per dollar while the Australian dollar was up 0.17% versus the greenback at $0.723.

However, the dollar was lower against other safe-havens, such as the Japanese yen, which was up 0.05% versus the greenback to 115.01 per dollar, while the dollar was down 0.34% versus the Swiss franc at $0.918.

The greenback rose 0.69% versus the Swedish crown to 9.39 per dollar after Riksbank Deputy Governor Martin Floden said Monday that the central bank is unlikely to raise interest rates in the coming year or so.

The euro edged up against the dollar on Wednesday as investors braced for further developments in the Ukraine crisis after Western countries announced sanctions against Russia for ordering troops into separatist territory.

Movement of Several Currencies Due to Escalation Increase

Short-term moves in all currency pairs are mainly driven by rate escalation, Moritz Paysen, an FX and interest rate adviser at Berenberg, said.

Surprisingly, the euro remains stable against the USD despite the risk-off move, but we assume that this won't be the case for much longer and the euro will then weaken, he added.

The single currency rebounded slightly on Tuesday as it neared its lowest level since February 3, the day the European Central Bank's hawkish shift boosted the exchange rate.

An escalation seems increasingly likely and can be expected to motivate a caution message by the ECB at its March 10 meeting, said SEB Group analysts. The euro was up 0.1% against the dollar at $1.1340 after hitting its lowest level on Tuesday since February 14 at $1.1286.

The New Zealand dollar jumped 0.8% after the Reserve Bank of New Zealand raised interest rates and said further tightening may be needed.

The Swiss franc was down 0.1% against the euro at 1.0435, after hitting its highest level since February 22 at 1.0335 the previous day. In January it hit its highest since June 2015 at 1.0298.

The yen fell 0.5% to 130.47 against the single currency after hitting its highest level since Feb. 3 at 129.34 on Tuesday. The oil-sensitive Norwegian crown was slightly higher against the single currency, hitting a new high since Feb. 15 at 10.0475.