Ukraine’s
hryvnia headed for the worst weekly depreciation in the world as the central
bank limited the supply of dollars to protect reserves amid a delay in
negotiations to release the next part of a $17.5 billion International Monetary
Fund loan.
The
currency weakened 2 percent to 25.675 per dollar by 2:51 p.m. in Kiev, the
lowest level since a devaluation almost a year ago sent it to a record 34.247
per dollar. The hryvnia is set for a 4.4 percent decline this week, the biggest
depreciation among all global currencies tracked by Bloomberg.
The
Washington-based IMF has withheld a third $1.7 billion loan tranche since
September after President Petro Poroshenko’s government delayed implementation
of a pledge to overhaul its tax system and adopt a budget. While the fund’s
executive board will probably unlock the next payment in February, the central
bank has provided limited relief for importers seeking hard currency amid
efforts to conserve reserves, according to Eavex Capital, a Kiev-based
brokerage.
"When
the year starts there is not enough export revenue to cover hard-currency
demand," said Dmitry Churin, an analyst at Eavex, who sees the hryvnia
weakening to 26.50 by the end of the year. "It could be a temporary
factor. If the IMF approves the disbursement of the next loan tranche, market
players will see that Ukraine has financial support and the currency should
strengthen back to 24 per dollar."
Intervention
Possible
The
IMF program envisages an average exchange rate of 24.1 per dollar
for 2016, compared with an average of 21.9 in 2015. Economists at the fund will
probably revise estimates, including for 2 percent economic growth this year,
at the loan review next month.
The
National Bank of Ukraine sold $19.1 million dollars at a foreign-currency
auction on Monday, compared with demand of $35.4 million. Daily turnover on the
interbank market in the past days has been $200 million, Churin said.
The
central bank may intervene to stop sharp declines in the currency, Governor
Valeriya Gontareva told reporters in Kiev on Thursday after the monetary
authority left the benchmark rate unchanged at 22 percent. Recent volatility is
seasonal and the foreign-currency market "is more or less stable,"
she said.
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