KIEV, July 4 – The National Bank of Ukraine on Wednesday strongly denied speculation it may be preparing to appreciate the hryvnia against the U.S. dollar due to an increasing inflow of hard cash.

Volodymyr Stelmakh, the governor of the NBU, said he was happy with the rate of inflation and with the pace of the country’s economic growth, adding there were “no reasons” for the appreciation.

“The exchange rate [between the hryvnia and the U.S. dollar] will be stable,” Stelmakh said at a press conference. “I don’t know who has been circulating this gossip and even linking it to the [upcoming] election. We don’t have any problem.”

The hryvnia, which rose against the U.S. dollar in morning trading between commercial banks on Wednesday, eventually closed unchanged at 5.0250 to the dollar, dealers said.

Stelmakh’s comment is a response to speculation that the NBU is prepared to let the hryvnia appreciate against the U.S. dollar amid concerns over rising consumer inflation.

A newspaper reported Monday the NBU had recently approved a resolution allowing it to rapidly appreciate the hryvnia in response to an increasing inflow of hard currency. But Stelmakh strongly denied the report.

“This is not true,” Stelmakh said. “There are no reasons for decisions like that.”

The issue is sensitive following the appreciation of the hryvnia on April 20, 2005, when the local currency had strengthened 2.7% against the U.S. dollar overnight. The move caused panic on forex markets and led to political repercussions, with Stelmakh summoned to Parliament to explain the action.

The newspaper report suggested a capital inflow in Ukraine had recently accelerated as some businessmen, backing undisclosed political groups, have been preparing to finance the Sept. 30 snap election campaign. The report said the NBU had been spending hryvnias to buy excessive dollars, but the development had been increasing money supply and could cause an increase in consumer inflation.

The NBU purchased $658.4 million on the forex market in June, down from $1.41 billion in May, according to a statement posted on the NBU’s Website.

Meanwhile, the NBU’s forex reserves rose a $1.13 billion, or 4.6%, to about $25.9 billion at the end of June, the statement said. This probably suggests the NBU spent hryvnias to buy out the recent $500 million issue of Eurobonds from the government, analysts said.

The NBU pledged to keep the hryvnia within a band of 4.95 and 5.25 to the dollar in 2007, but the NBU Council, the body that defines the bank’s strategic policy, recently suggested the same band must stay intact throughout 2008.

Stelmakh said the bank was so far happy with consumer inflation, and said consumer prices in June will probably grow less than had been expected.

“I think [the inflation figure in June] will be good,” Stelmakh said. “It will be lower than had been expected.”

Ukraine’s consumer prices rose 0.6% on the month in May pushing cumulative inflation in January through May to 1.9%, one of the lowest such indicators over the past decade.

Ukraine reported inflation at 11.6% in 2006, up 10.3% in 2005, according to the State Statistics Committee. (tl/ez)