KIEV, Nov. 25 – Panic is sweeping the country as the hryvnia faces steep downward pressure, Volodymyr Stelmakh, the governor of the National Bank of Ukraine, said Tuesday.

The comment provides a glimpse into thinking at the NBU as the hryvnia faces its greatest challenge in a decade, losing 35% of its value over the past two months.

“Right now the question is in the panic,” Stelmakh said in an interview with Interfax-Ukraine.

“I am told that lawmakers come to a bank and hysterically demand to swap their national currency-denominated deposits into hard currency at official exchange rate. How can they do that? These people didn’t make their money in a coalmine, but they do cause the panic.”

The NBU has been trying over the past three days to adjust its official exchange rate closer to market-based exchange rates recorded in daily trading between commercial banks.

A recent decision by the NBU calls for setting the official exchange rate, which is used in tax transactions between exporters and the government, daily based the interbank trading from Nov. 28.

The hryvnia continued its freefall against the U.S. dollar Tuesday, losing 5% of its value as the NBU has again refused to tap its forex reserves for interventions for the support of the hryvnia.

The hryvnia closed at 6.70 hryvnias to the dollar on Tuesday, compared with 6.50/dollar on Monday and 6.35/dollar on Friday, dealers said.

Later in the day the NBU set its official exchange rate at 6.60/dollar that will be in effect on Wednesday, compared with 6.29/dollar on Tuesday and 6.17/dollar on Monday, according to the central bank.

But the different exchange rates quoted the NBU for most of the time are irrelevant as it was often impossible to purchase hard currency on the streets of Kiev whatsoever.

“I checked a dozen of kiosks today - all of them told me that they had ran out of dollars in the morning,” Oleksandr, a 36-year old computer specialist, said Tuesday.

Stelmakh’s comments pointing to the panic come as the office of President Viktor Yushchenko has been busy trying to find out what exactly has been causing a major demand for hard currency.

“Our team will analyze the situation with demand for hard currency,” Oleksandr Shlapak, Yushchenko’s deputy chief of staff and a former deputy governor at the NBU, said adding the research may take a day or two. “We must fully understand this.”

Demand for hard currency on the internk market exceeded $1 billion on Monday, compared with $500 million supply, the gap that has been causing a major downward pressure on the hryvnia, according to the Yushchenko office.

The NBU has been spending its dollars massively since the end of October, but the tactic had not produced any tangible result.

“We’re simply easing the panicky mood,” Stelmakh said in a reference to weeks of massive selling of dollars since late September.

Stelmakh also resorted to verbal intervention on Tuesday, citing the Big-Mac Index, an universal measure of the value of Big Mac at McDonald’s restaurants across the world.

The index, Stelmakh said, shows that the hryvnia is actually undervalued and should within 3 hryvnias per dollar and 4 hryvnias per one euro.

The NBU also announced it will be inviting bids from commercial bank that will participate in an auction aimed at selling dollars and other hard currencies on Wednesday.

The selling will take place in the form of an auction, and the interested banks will be submitting their bids to the NBU. “The minimum bid is $100,000. The banks should quote the desirable exchange rate up to two digits after decimal points.” (tl/ez)