By 8.30am the Kiwi was trading at just under US67c, having earlier traded as low as US66.75c, from its US67.40c close in New York.
"It's all been in response to the imposition of fresh sanctions," ANZ strategist David Croy said.
"There's been an unwinding of that optimism that came out of the market on Friday," he said. "Risk sentiment is pretty fragile here."
The conflict comes at a time when most central banks around the world are looking at raising their interest rates and winding back their quantitative easing programmes to stem a rising tide of inflation.
The US, European Union and the UK on Saturday agreed to put in place sanctions on the Russian financial sector, including a block on its access to the global financial system known as Swift and, for the first time, restrictions on its central bank in retaliation for its invasion.
Last week, share markets around the world did a major about-face by first falling sharply on the invasion news before staging a comeback on Friday when it became clear sanctions would not include oil and gas.
The Biden Administration won't sanction Russian crude oil because that would harm US consumers and not Vladimir Putin, a US State Department official said on Friday.
"The sanctions will not target the oil flows as we go forward," Amos Hochstein, the State Department's senior energy security adviser, said in an interview on Bloomberg Television.
America's stance drove US oil futures down to US$92 a barrel on Friday from US$100 a day before.
Wall Street's main benchmark - the S&P500 - had dropped as much as 2.6 per cent on Thursday before closing 1.5 per cent higher on Friday.
Similarly, New Zealand stocks started on Friday with a 3.3 per cent plunge but ended the session with a 1.63 per cent gain, the S&P/NZX-50 closing at 11,923.38.
At that level, the index is 12.60 per cent down from its record high in January, 2021, of 13,643.78.
In the debt markets, local bond yields resumed their upward trend late last week.
By the close on Friday, New Zealand two-year bonds were at 2.39 per cent, five years at 2.68 per cent and the 10 years at 2.80 per cent.
Kiwibank chief economist Jarrod Kerr said the markets' initial response to the Ukraine invasion was a typical "risk-on" reaction.
"We are in a volatile period with a pretty significant geopolitical event unfolding," he said.
"Whenever there is a serious threat, you see the usual war trade play out, which is buying US treasuries, gold, US dollars and yen.
"But what we are seeing now is more of a mixed reaction as financial markets try to digest the fact that central banks are lifting interest rates or are in the process of lifting interest rates - and are winding back their balance sheets.
"European markets are going to continue to be quite volatile and will have to comprehend a new world where money is not being printed and sprayed around anymore," Kerr said.
"So there is quite an array of forces working their way through markets at the moment, which is leading to volatility."
Neither Russia nor Ukraine are significant export destinations for New Zealand produce.
However, Kerr expected commodities prices - including dairy - to gain as a result of the conflict.
Wheat and other grain prices - key inputs for northern hemisphere dairy producers - have soared since the invasion.
