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. Last Updated: 07/27/2016

Ukrainian Currency Falls To Record Low for 1999

KIEV -- Ukraine's hryvna currency fell Wednesday to its year-low of 5.6 to the dollar on the interbank market, but a senior central bank official said the bank planned no tough action to prop up the frail currency.

Serhiy Yaremenko, head of the bank's currency operations department, told Reuters he expected the hryvna to stabilize.

"There is no collapse [of the rate]. What we have now is a market fixing of the hryvna against the dollar," he said. "Hard currency supply remains unchanged, but the hryvna supply has increased."

The government and central bank set a rigid 3.4 to 4.6 per dollar corridor for the hryvna in February.

Since then the hryvna has broken through the trading band several times.

The hryvna, in steady decline since last month when it was shattered by increased money supply and political uncertainty amid a presidential election, fell on the interbank market to 5.6 per dollar from 5.27 to 5.30 per dollar Tuesday.

The central bank set its official rate for the hryvna, based on the average market rate of two days ago, at 4.8632 per dollar Wednesday, down from 4.8396 to the dollar Tuesday, but street changers bought dollars for up to 5.70 hryvnas.

Yaremenko said the central bank planned no administrative restrictions on the interbank market as the major reason behind the hryvna slide was the general weakness of the economy.

He also said the central bank did not plan to intervene with its hard currency reserves to support the currency and added that the hryvna could stabilize at 5.25 hryvnas to the dollar.

But currency dealers saw the rate sliding to around 6 hryvnas to the dollar in coming days.

They said it could fall even further to 9 hryvnas to the dollar early next year.

"What can the central bank do?" one dealer asked. "Central bank reserves are meager and, moreover, $3 billion in foreign debt payments due next year are just crushing."

Central bank foreign currency reserves fell to $1.315 billion Nov. 11 from $1.458 billion Oct. 1.

The central bank was trying to mop up excess hryvnas on the interbank market by selling certificates of deposit.

It raised a total of 178 million hryvnas from CD sales last week.

Overnight rates on the interbank market fell to a year low of 3 percent to 5 percent Wednesday.