Ukraine cbank bids for euros in unprecedented move

10:57, 23 July 2008
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Ukraine`s central bank bought more than 200 million euros

Ukraine`s central bank bought more than 200 million euros on the interbank market on Tuesday, bidding openly for them for the first time, a top central bank adviser said, according to Reuters.

The bank bid 7.3739 hryvnias per euro earlier in the day, according to the Reuters page .

Although the bank trades euros and other currencies on the market, the deals are usually made with individual banks and prices are not disclosed.

The head of the bank`s advisory group, Valery Lytvytsky, said the open bidding showed that the bank wanted a more transparent currency policy and that buying up euros underlined a shift away from a strict dollar peg.

"Even before, we never had a formal link to the dollar and now, in this way, we are emphasising yet again that we do not have a formal link to the dollar," he told Reuters.

The bank normally intervenes on the market by buying or selling dollars, especially during a strict three-year regime when it kept the hryvnia pegged to the dollar at 5.00-5.06.

It dropped that policy around February-March, allowing the hryvnia to strengthen against the dollar on the market, and revaluing the official rate to 4.85 hryvnias. It has since repeatedly altered that rate, which now stands at 4.84.

Purchases on the market will allow the bank to increase its foreign currency reserves to $38 billion this month from $35.439 billion as of June 30, Lytvytsky said.

The bank has said before it will increase the share of euros in its foreign currency reserves at the expense of the dollar and that there were already more euros in the reserves than dollars.

"We have our own notion about how to optimise the structure of our currency reserves and are moving in that direction," Lytvytsky said.

"In future, we will see other methods of gradually fulfilling our currency rate policy," he said, but did not elaborate.

Earlier this month, the bank`s council, which originally objected to the decision taken by the bank`s executive board to revalue, said the official rate to the end of the year should be 4.85/$ plus-minus 4 percent.

The hryvnia traded at about 4.60-4.63 to the dollar and 7.28/7.33 to the euro on Tuesday.

Reuters, Guardian

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