After months of stability, hryvna is shaken from position following president's call to weaken Ukraine's national currency
appeal to central bankers to weaken the Hryvna, Ukraine’s national currency, on Monday the Hryvna devalued rapidly on the interbank currency market, wire reports said.
While Monday’s trade session opened at Hr 5.4192/5.4225/USD, by 1 p.m. the exchange rate reached Hr 5.43/5.4350/USD, the Ukrainian News agency reported. But intervention by the National Bank of Ukraine was expected, and no trading occurred at Hr 5.4350/USD, the director of the NBU’s currency regulation department Serhy Yaremenko told Ukrainian News.
The NBU sold $23 million on April 2 at Hr 5.4198/USD, satisfying demand.
Kuchma has instructed NBU to revise its foreign exchange policy in line with the projected inflation rate of 13-14 percent to support national exporters.
The president put forward the initiative at a special congress of the Ukrainian Alliance of Industrialists and Entrepreneurs, Novecon reported.
Supply on the Ukrainian forex market has recently exceeded demand from national importers, resulting in a gradual appreciation of the hryvna rate.
Under existing rules, only commercial banks that service import contracts have the right to purchase hard currency on the local market, which artificially curbs demand for dollars.
Last year, the hryvna depreciated by a modest 4 percent against the dollar, while annual inflation ran at an impressive 26 percent.
Since the start of this year, the hryvna rate has inched up by 0.2 percent against the dollar, with inflation hitting 2.1 percent for the period, the Novecon report said.
While the NBU has not made a decision on Kuchma’s appeal, the government announced it does not support hryvna devaluation.
Economy Minister Vasyl Rohovy noted that the hryvna rate fell sharply in 1998-1999, which negated its gains made last year, according to Ukrainian News.
“For now, we have a reserve. Our currency unit was devalued too much in 1998,” said Rohovy.
Finance Minister Ihor Mytiukov said that inflation has declined significantly so far this year.
A stable exchange rate under conditions of a high inflation rate last year caused the real value of the hryvna to strengthen.
According to the Economy Ministry’s forecast, inflation will not exceed 3 percent in the first quarter as opposed to the earlier predicted 5-6 percent.
“I do not see a large disproportion in the trends that have formed on the money and currency markets,” Mytiukov said.
However, both ministers admitted that the potentially dangerous influence of a stronger hryvna on the economically important-export sector must be considered.
At the same time, they expressed confidence that it is still too early to talk about this problem, and it should be considered in the future.
Mytiukov suggested that the president’s statement should be understood as a warning.
