The Australian dollar is treading water as the Ukraine crisis hits appetite for riskier assets.

At 0700 AEDT on Tuesday, the local unit was trading at 89.28 US cents, slightly up from 89.24 cents on Monday.

Escalating tension between the Ukraine and Russia has unsettled investors, dragging down global markets.

Riskier assets like the Aussie dollar are at the mercy of what develops in the Ukraine, Westpac New Zealand senior market strategist Imre Speizer said.

“The question is, will the Ukraine crisis escalate or stabilize?,” he said.

“If it escalates, the Aussie will fall and if it stabilises, the Aussie will rise.”

The geopolitical crisis on Monday dragged the Australian dollar as low as 88.91 US cents, the currency’s weakest level since February 5.

The Ukraine is on the brink of war with Russia over the southern region of Crimea, a peninsula on Ukraine’s Black Sea coast which has a large population of ethnic Russians.

In local economic news, the Reserve Bank of Australia is not expected to change the cash rate at its board meeting on Tuesday.

AAP