Ukraine’s National Bank considers ditching hryvnia support
Since the 2009 devaluation, Ukrainian authorities managed to keep the hryvnia stable against the dollar. Now they are willing to sacrifice the exchange rate to save the reserves of foreign currency, which have decreased 10 times, experts say.
The Financial Times claims that Russia’s threats to suspend the financial assistance until Ukraine forms a new government pressure the National Bank of Ukraine so that it is creaking at the seams.
Since the beginning of 2014, hryvnia to dollar exchange rate has already fallen 5%. In late January, the NBU sold yet another $500 million trying to support the national currency. Since then, traders say, the bank did not intervene on the market. The country’s reserves of foreign currency are rapidly running out.
“Exchange rate largely depends on whether Russia will continue financing,” says Alina Slyusarchuk, economist at Morgan Stanley.
She estimates that at the end of January National Bank reserves lingered between $1.3 to $2 billion, compared to over $20 billion in the coffers at the end of the last year.
This rapid reduction of currency reserves could be due to recent currency interventions and debt payments; meanwhile, Ukraine has already delayed its $2.7 billion payment to Gazprom, which was due last week, writes The Financial Times.