More money for your money in Ukraine…
Ukraine’s hryvnia may slide at least 20 percent against the dollar as the International Monetary Fund pushes the country to accept greater exchange-rate flexibility and banks and businesses convert a backlog of local currency, according to Commerzbank AG.
The IMF approved a $15.2 billion loan for Ukraine in July, its second for the former Soviet republic since 2008, with the issuing of each tranche dependent on the country meeting conditions that include moving to a flexible currency regime. The central bank has been “more hands off” in its actions in the past two weeks after buying and selling dollars almost every day to keep the hryvnia around 7.9 per dollar through June and July, Alexander Valchyshen, head of research at Investment Capital Ukraine in Kiev, said in an interview yesterday.
The hryvnia weakened 1.4 percent to 7.93 per dollar yesterday, and gained 1 percent to 7.82 on Sept. 7. The currency, which tumbled 60 percent in 2008 amid the global credit crisis, hasn’t recorded a daily move of more than 1 percent since December 2009, according to data compiled by Bloomberg.
“The IMF won’t be willing to accept continued defiance of their conditions,” Ulrich Leuchtmann, head of currency strategy in Frankfurt at Commerzbank, Germany’s second-largest bank, said in an interview yesterday. “If they float it now a huge amount of money will flow out of Ukraine. Every Ukrainian company and household that hasn’t been able to convert will take to the market.”
The currency may slip to “double digits” of at least 10 per dollar should greater flexibility be allowed, Leuchtmann said.
The hryvnia “will not be weaker” than 8 per dollar by the end of the year, National Bank Governor Volodymyr Stelmakh said yesterday, adding policy makers intend to continue with their intervention policy. The central bank sold $33 million yesterday and $100 million on Sept. 7 to limit the hryvnia’s advance, said Sergiy Kruglik, the bank’s external relations chief.
(from www.bloomberg.com)
