Ukraine's Central Bank should cancel auctions, Shlapak Says

18:13, 27 November 2008
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Because they weaken the currency

Ukraine`s central bank should cancel auctions to sell dollars to support the hryvnia because they lead to speculation and weaken the currency, said Oleksandr Shlapak, first deputy head of the president`s staff, Bloomberg reported.

The Kiev-based Natsionalnyi Bank Ukrainy introduced the auctions earlier this month to take hryvnia off the market and bolster it.

``I think that the central bank`s tool of dollar auctions is a big mistake,`` Shlapak said today in an e-mailed statement. ``Speculators have the first hand in buying foreign currencies at auctions as they do not bother about the rates. The auction mechanism pushes the rate further.``

The hryvnia has slumped more than a quarter this year as turmoil in global credit markets deterred investment in emerging markets. Ukraine received a $16.4 billion loan from the International Monetary Fund this month to finance its $8.4 billion current-account deficit and to help stabilize the banking system.

The hryvnia dropped to 7.2500 per dollar by 12:13 p.m. today on the interbank market in Kiev, compared with 6.7500 yesterday. The central bank has spent more than $2 billion this month to support the hryvnia, said Anatoliy Shapovalov, the bank`s first deputy governor.

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