6 февраля 2015

FINANCIAL TIMES: WARTORN UKRAINE’S CURRENCY COLLAPSES

Ukraine’s hryvnia plunged 30 per cent to a record low against the dollar on Thursday after the central bank abandoned attempts to prop up the currency and let it float freely against other currencies.


The central bank also lifted its key interest rate from 14 per cent to 19.5 per cent as part of a monetary policy shift from defending the valuation of the hryvnia towards controlling inflation.


The hryvnia’s plunge coincided with an announcement that central bank foreign exchange reserves fell almost 15 per cent last month to $6.42bn, far below the three months of import coverage considered sustainable by most economists.


The developments thrust the wartorn and recessionbattered country one step closer to a financial meltdown and heightened urgency for a speedy approval of a fresh International Monetary Fund bailout.
An IMF mission is in Kiev wrapping up discussions on a new assistance package.

 

Alexander Valchyshen, head of research at Investment Capital Ukraine, said: “The rate hike and backing off from interventions were long overdue to put the economy on a more balanced macroeconomic path. These were not only conditions of the IMF but unavoidable measures which the authorities tried to postpone.”

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