Hryvnia plunges most in 10 years

15:49, 29 October 2008
Politics
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 As banks buy dollars for Debt

Ukraine`s hryvnia slid the most in 10 years against the dollar as political disunity damped optimism an International Monetary Fund loan will shore up the nation`s finances and company demand for U.S. currency soared, Bloomberg reported.

The currency tumbled more than 12 percent to an all-time low even as the Parliament in Kiev approved legislation paving the way for the $16.5 billion bailout from the IMF. Ukrainian banks and companies are selling hryvnia to pay as much as $1.5 billion of loans due by month-end, according to Dmitry Gourov, an economist at UniCredit SpA in Vienna.

``It`s the end of the month and debt repayments need to be made so that`s fueling the extra need for dollars,`` Gourov said. ``People are buying dollars at whatever rate they can get their hands on them.``

The hryvnia fell to an all-time low of 7.1250 per dollar as of 2:31 p.m. in Kiev, from 6.3500 yesterday, the biggest intraday decline since September 1998.

The hryvnia slumped 25 percent against the dollar this month as investors pulled cash from emerging markets on concern the global financial turmoil will make it more difficult for developing economies to pay foreign debt. Ukraine would default on its debt without the IMF loan, central bank Governor Volodymyr Stelmakh said today. The former Soviet republic`s current-account deficit is $8.4 billion.

Lawmakers approved a bill today that will release the IMF loan after voting was postponed four times as backers of Prime Minister Yulia Timoshenko physically blocked sessions of Parliament because of opposition to separate legislation on the funding of snap elections. Ukraine will hold a general election in December after President Viktor Yushchenko`s party withdrew from an alliance with Timoshenko`s.

``The market is very concerned the IMF package is being held up,`` Ulrich Leuchtmann, head of emerging-markets currency strategy at Commerzbank AG in Frankfurt, said before the international loan was approved by Parliament. ``They don`t seem to be in the right political state to deal with such things.``

Bloomberg

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