Hryvnia Weakens to Record as Ukraine Says Rebels Keep Shelling
Ukraine’s currency weakened the
most in more than five years to a record amid speculation that a
planned foreign-currency auction failed to meet demand by banks.
The hryvnia slid 11 percent to 14.40 per dollar by 7:10
p.m. in Kyiv, the biggest decline since January 2009, data
compiled by Bloomberg show. The currency has tumbled 43 percent
this year, the most among more than 170 peers tracked by
Bloomberg. The yield on government Eurobonds due in July 2017
increased 1.52 percentage points this week.
The central bank planned to sell $500 million at an auction
to “to meet the needs of clients,” according to a statement on
its website dated yesterday. Foreign-exchange reserves have
tumbled 22 percent this year as policy makers defended the
hryvnia. Citizens have sought the safety of international
currencies amid a conflict with pro-Russian separatists in the
country’s east that’s pushing the economy deeper into recession.
The drop in the hryvnia was probably linked to a “lack of
foreign-exchange liquidity in the market,” Simon Quijano-Evans,
the London-based head of emerging-market research at Commerzbank
AG, said by e-mail. “It could be that the National Bank of
Ukraine didn’t satisfy the demand for foreign exchange.”
Ukraine’s military said rebels shelled positions in the
Donetsk region overnight, adding to reports of violations of a
truce that began on Sept. 5. Goldman Sachs Inc. and BNP Paribas
SA analysts said this week a failure to resolve the conflict may
prompt a sovereign-debt restructuring.
Draining Reserves
“Ukraine with its scarce international reserves and weak
economy is hurt the longer this goes on,” John Hardy, a
Copenhagen-based foreign-exchange strategist at Saxo Bank A/S,
said by e-mail.
The hryvnia may slump to 15.5 per dollar in a year, Bank of
America Corp. said in a report earlier this week. Ukraine’s
foreign-exchange reserves have dropped to $15.8 billion in
August, according to central bank data compiled by Bloomberg.
President Petro Poroshenko headed back home from a visit to
the U.S. with a $53 million package of new economic and military
aid yesterday. President Barack Obama stopped short of providing
lethal weapons the government in Kyiv requested.
The International Monetary Fund has offered $17 billion in
loans, and Ukraine may need another $19 billion by the end of
next year if the conflict in its eastern regions rages on
through 2015, the IMF said Sept. 2.
To contact the reporters on this story:
Andras Gergely in Budapest at
agergely@bloomberg.net;
Lyubov Pronina in London at
lpronina@bloomberg.net
To contact the editors responsible for this story:
Wojciech Moskwa at
wmoskwa@bloomberg.net;
Daliah Merzaban at
dmerzaban@bloomberg.net
Stephen Kirkland, Daliah Merzaban