KIEV, March 26 – The National Bank of Ukraine has scrambled to stop the sudden appreciation of the hryvnia against the U.S. dollar by changing regulations and making verbal interventions discouraging people from selling the greenback.

The NBU reacted to the hryvnia’s surprise appreciation by up to 5% against the dollar throughout exchange kiosks over the weekend, spurred on by speculation the bank may have started to favor a strong hryvnia policy.

The NBU approved a regulation allowing Naftogaz Ukrayiny, the national oil and gas company, to buy hard currency for the company’s foreign exchange reserves without producing foreign trade contracts.

“Yesterday, we allowed Naftogaz to buy hard currency without producing the contracts,” Anatoliy Shapovalov, the deputy governor of the NBU, said Wednesday. “Naftogaz did not have a contract with Russia and in fact has not been buying hard currency.”

The new regulation lets Naftogaz start buying hard currency immediately, which the NBU believes will increase demand for dollars and will stabilize the foreign exchange market.

The NBU also called on the people to stop panic selling of U.S. dollars, warning they might face losses when the dollar appreciates.

“Unfortunately, the people haven’t been taught a lesson in the past and keep selling dollars when it is on the bottom of its value and buy euros when it is on its peak of its value,” Shapovalov said.

The steps taken by the NBU helped to ease the selling pressure on the dollar with the exchange rate rebounding to between 4.90 hryvnias and 4.95 hryvnias on Wednesday, compared with 4.65 on Tuesday.

The increased selling of dollars began over the weekend apparently amid speculations that NBU has changed its policy of keeping the hryvnia stable and will now favor a stronger hryvnia.

“It was like an avalanche,” a currency trader said describing the panic among the people. “The more dollars have been sold the stronger the hryvnia has been becoming. And the people kept selling.”

The run on the dollar was fueled by speculations that the central bank may resort to letting the hryvnia appreciate in order to slow down skyrocketing consumer inflation this year.

The NBU has been officially quoting the hryvnia at 5.05 to the dollar for the past three years, but its policy allows the hryvnia to strengthen to 4.95 to the dollar.

But Oleksandr Kireyev, NBU’s banking regulation department head, rejected the speculations, adding the strong hryvnia would further deteriorate the country’s current account deficit.

“The appreciation can hardly be effective in these circumstances when we have a current account deficit,” Kireyev said. “If the exchange rate policy is changed, we may get serious problems within one quarter.”

Meanwhile, the new regulation may help Naftogaz to accumulate hard currency to be able to pay $2 billion debt for Russian gas supplies that is thought to have been accumulated since the beginning of the year.

President Viktor Yushchenko urged Prime Minister Yulia Tymoshenko to immediately arrange talks with Russian gas giant Gazprom in order to make sure the debt is paid in full.

Tymoshenko wants to make Naftogaz the key supplier of natural gas to domestic consumers after removing UkrGaz-Energo, a controversial gas trader, from the market earlier this month.

This means Naftogaz will be responsible for paying for gas supplies delivered to the Ukrainian border, which explains the need for Naftogaz to build its hard currency reserves. (tl/ez)