Ukraine currency hits record low against dollar

GMT 20:46 2014 Tuesday ,12 August

Arab Today, arab today Ukraine currency hits record low against dollar

A man walks past a foreign currency exchange office
Kiev - AFP

Ukraine's national currency fell Tuesday to a record low against the dollar, the central bank said, as fierce fighting in the east provoked "panic" among the population.
The National Bank of Ukraine said that the average exchange rate it calculates based on interbank transactions had dropped to 13.14 per dollar. The hryvnia also plunged to 17.58 per euro.
Central bank governor Valeriya Gontereva told an emergency session of parliament "there is no economic factor that would justify" the hryvnia's sudden drop in value.
She spoke of "a sense of panic among the population and business leaders" and added that central bank sales of almost $150 million had failed to stem the tide.
Gontereva had sharp words for "provocative declarations by different political parties with respect to the strong probability of a large-scale war with Russia."
Ukraine has spent four months battling pro-Russian separatists in eastern regions following Moscow's annexation of the Crimean peninsula.
On Monday the central bank said it did not plan to drop its floating exchange rate policy even though it has intervened three times in recent days to try and halt the currency's fall.
But it did warn that "if there was a substantial increase in foreign exchange market turbulence, the National Bank would be forced to impose administrative restrictions, along with market-based measures."
Gontareva said that emergency measures might have been taken last week but were not because the bank wanted to first get approval for any action from the International Monetary Fund.
The IMF is due to release $1.5 billion in financial aid for Ukraine on August 29 as part of a total package worth $17 billion.
That is the lion's share of a total international rescue plan worth $27 billion granted to Kiev in April in exchange for strict economic reforms.  
The central bank noted on Monday an improved balance of payments and emphasised that there were "no macroeconomic grounds" for the sharp currency fluctuations.
One economist agreed that there were no fundamental reasons for the currency's slump, pointing rather to a short-term impact from the fighting and fears of a possible Russian invasion.
"This was caused by the population reacting to the negative stream of news and looking to save money in foreign currencies," Olena Bilan, chief economist at investment firm Dragon Capital, told AFP.
Ukraine's economy is in dire straits however, with business activity contracting by 2.3 percent in the second quarter of 2014 from the first three months of the year.
That period was already marked by a 2.0 percent drop from the last quarter of 2013, and Ukraine has essentially now been in recession for more than two years.
In July, the central bank hiked its key lending rate to a record 12.5 percent to battle inflation, but the move is likely to crimp economic activity further.
President Petro Porochenko said in late July that the fight against pro-Russian separatists was costing around 70 million hryvnias ($5.3 million, 4.0 million euros) per day.


Arab Today, arab today
Arab Today, arab today
arabtoday arabtoday arabtoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabs, Arab, Arab