Cablegate: Nbu Intervenes to Slow Hryvnia Currency Slide
RR RUEHIK RUEHLN RUEHPOD RUEHVK RUEHYG
DE RUEHKV #2002 2830649
ZNR UUUUU ZZH
R 090649Z OCT 08
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC 6496
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHZG/NATO EU COLLECTIVE
UNCLAS KYIV 002002
DEPT FOR EUR/UMB, EB/OMA
USDOC FOR 4231/ITA/OEENIS/NISD/CLUCYK
TREASURY PLEASE PASS TO TTORGERSON
E.O.: 12958: N/A
TAGS: ECON EFIN UP XH
SUBJECT: NBU INTERVENES TO SLOW HRYVNIA CURRENCY SLIDE
REF: A) KYIV 1995 B) KYIV 1959
Sensitive But Unclassified. Not for Internet Distribution.
1. (U) Responding to the weakening hryvnia (UAH), National Bank of
Ukraine (NBU) Council Chairman Petro Poroshenko on Tuesday announced
that the official exchange rate for this year would be changed to
UAH 4.95/$ plus or minus 8 percent from the previous UAH 4.85/$ plus
or minus 4 percent. Despite the announcement, the UAH continued its
slide yesterday, trading in the morning between UAH 4.60 to UAH 4.80
to the U.S. dollar on the interbank currency market, well outside
the new "official" exchange rate.
2. (U) The NBU Council pronouncement of a new policy was only
advisory, as ultimate monetary policy authority rests with the NBU
Board of Governors and its head Volodymyr Stelmakh. There was no
evidence during the morning yesterday that the NBU would intervene
in the currency market in an attempt to implement the new "official"
policy. However, at noon on Wednesday, the NBU announced that it
would sell U.S. dollars at an exchange rate of UAH 5.0/$. Contacts
in the banking community confirmed that the NBU was selling to
commercial banks at the announced UAH 5.0/$ rate, but in quantities
less than 50 percent of that requested by the commercial banks.
Following the NBU's action, the interbank exchange rate declined to
UAH 5.50/$ for those who could not fulfill their dollar needs buying
from the NBU.
3. (U) Comment: The NBU's actions in the market yesterday were
clearly an attempt to bring some stability to a quick moving
currency market that was being driven in part by speculators. The
NBU has not announced whether it plans further interventions, though
its $37 billion in foreign reserves certainly are sufficient at this
time to allow future interventions if the NBU chooses to make them.
Over the longer term, however, NBU interventions in the market could
prove futile, especially in the context of the global financial
crisis and other external factors bearing down on Ukraine's economy.