Ukraine hryvnia slips with no c.Bank intervention

17:48, 18 November 2008

Ukraine`s hryvnia slipped to 6.0 to the dollar

Ukraine`s hryvnia slipped to 6.0 to the dollar on Tuesday from 5.83 the previous day in the absence of what in recent weeks has become routine central bank intervention to support the currency, Reuters reported.

The central bank intervened on Monday, selling dollars on the interbank market at 5.79.

"In the absence of the central bank, trading slipped below 5.90, but I can`t say there is any panic," said one dealer.

"But we could fall to 7.0 tomorrow. There were offers to buy dollars at 6.10. There were some deals this morning at 5.97 but the amounts were very small."

Traders said the central bank had given no explanation for not supporting the hryvnia as it has for nearly two months.

"People are saying it`s because of the IMF, that the Fund is unhappy, that this is not a real market and that reserves are being spent -- and not on structural changes," said one dealer.

The International Monetary Fund this month agreed to give Ukraine a $16.4 billion loan to stabilise the economy and the banking system and has disbursed the first $4.5 billion tranche.

The central bank in October spent $4.115 intervening on the market to sell dollars. It had in recent weeks pledged to sell dollars without limit.

The central bank`s deputy chairman, Oleskander Savchenko, told a weekly newspaper on Monday that the hryvnia would remain stable at 5.5-6.0 and strengthen in the second half of 2009. He ruled out as improbable any decline to weaker than 7.0.

But Oleskander Shlapak, top economic adviser to Ukraine`s president, renewed the criticism he had directed at the central bank in October, when the hryvnia sank to 7.0. He said he was again unhappy with developments on the currency market.

"Things are not well on the market," he told a briefing. I`m talking about the level of demand (for dollars) over five or six days -- about $1 billion every day. That raises many questions."

Levels of imports and purchases of dollars by consumers did not justify that level, he said, and President Viktor Yushchenko would seek explanations at a meeting on Thursday with bankers.

"If this is psychological and speculative demand, we know how to deal with it," he said. "If we do not have a balanced rate, then measures must be taken to set down such a trend."

Dealers said the thrust of official policy was hard to gauge given the central bank chairman`s pledge that the hryvnia would go no weaker than 6.0 and that there would no longer be any discrepancies between the market rate and an "official" rate.

"You have to be consistent. They said there would be a single rate. They said they would sell dollars without limit. Where is the single rate?" said one dealer.

"And the central bank is saying nothing. You cannot restore confidence with inconsistent moves. Dealers and the public will rely only on themselves. Why not buy a dollar today at 6.20, if it will cost 7.0 tomorrow?"

Reuters via Guardian

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