KIEV, Nov. 18 – The hryvnia lost value rapidly against the U.S. dollar on Tuesday amid signs the National Bank of Ukraine was reconsidering its policy of “unlimited” interventions to back the local currency.

The hryvnia closed at 6.00 hryvnias to the dollar in trading between commercial banks Tuesday compared with 5.83/dollar Monday, after the NBU refused to sell its hard currency for the first time since Oct. 30.

Some banks were trying to buy dollars even at 6.10 hryvnias to the dollar on Tuesday, underscoring a continued market pressure towards the hryvnia’s deprecation, dealers said.

The developments signal a turnaround on the forex markets, perhaps suggesting the NBU’s 18-day policy of “unlimited” dollar interventions has been failing to stabilize the local currency.

President Viktor Yushchenko plans to hold a meeting with the NBU and the country’s biggest commercial banks on Thursday, a meeting which can lead to a major policy change, according to the presidential office.

The hryvnia’s weakening on Tuesday comes after five days of robustly growing demand for hard currency on the forex market that senior officials at the NBU have not been able to explain.

“The demand of $1 billion that has been emerging on the market every day raises too many questions,” Oleksandr Shlapak, the first deputy chief of staff at the Yushchenko office and a former deputy governor at the NBU, said at a press conference. “If this is a psychological or speculative demand we should be able to know how to deal with it.”

The sudden weakening of the hrynia comes despite the fact that the International Monetary Fund has recently approved a $16.4 billion emergency loan to Ukraine, of which $4.5 billion had been already disbursed. The loan was aimed at supporting the hryvnia and the country’s banking sector, which had been suffering due to restricted access to credit resources caused by the global credit crunch.

The NBU’s decision to let the hryvnia slide signals a turnaround of its policy of spending “unlimited” amount of dollars to try to calm down the run on the local currency. The policy, which was in effect since October 31, has been showing signs of improvement.

Yushchenko on November 4 cited statistics showing the amount of people’s deposits in commercial banks had been growing steadily, while the hryvnia had been showing signs of stability against the dollar.

The NBU has been fighting the attack on the hryvnia since early October by spending up to $5 billion in interventions during that month, but was forced to step up the interventions in the first two weeks of November.

The NBU changed the policy following a meeting with Yushchenko and after the hryvnia had fallen to 7.20 hryvnias to the dollar in trading in late October, compared with 4.85 hryvnias/dollar in September.

Yushchenko assured markets on November 5 that the hryvnia will not lose much of its value through the end of the year, and said “The hryvnia’s real value today is below the level of 6 hryvnias to the dollar. This is a good value.” (tl/ez)