Central Bank Council vetoes decision of c.bank board on strengthening hryvnia

16:59, 22 May 2008
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This decision was supported by almost all council members

The Ukrainian National Bank Council today vetoed the decision of the NBU board on strengthening hryvnia.

Ukrayinska Pravda was informed about this by central bank Supervisory Council member Vassyl Horbal.

According to him, this decision was supported by all council members, except NBU chairman Volodymyr Stelmakh, who abstained from voting.

As UNIAN reported earlier, Ukraine`s central bank strengthened the official rate of the hryvnia to 4.85 to the dollar from 5.05, according to the bank`s Web site on Wednesday.

According to Reuters, the bank has been under pressure to revalue or liberalise the hryvnia after inflation began rising last year, hitting 30 percent annually. Ratings agency Standard & Poor`s immediately called the bank`s move a step towards curbing price rises.

"Liberalising the exchange rate regime should help to curb inflation of tradeables, and in particular commodities such as gas and food, which are priced in dollars," the agency said in a statement. It has a rating of BB- for Ukraine.

"It is more or less what the market has been trading the past few days. It`s a first step," BNP Paribas currency strategist Elisabeth Gruie said.

"It`s clearly not going to be enough. I would say they would need another five to 10 percent to tackle inflation," she said.

The bank had kept the hryvnia in a tight range of 5.00-5.06 since 2005, within a wider target of 4.95-5.25 but traders said it stopped intervening in February-March.

The hryvnia had been hovering around 4.7-4.8 since then, but soared further in recent days to 4.6 to the dollar after comments from various central bank officials indicating a revaluation soon. On Wednesday, the hryvnia traded at 4.54/$.

The bank had said that a news conference was due on Thursday at 1400 GMT after a meeting of the policy council.

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