KIEV, June 17 – President Viktor Yushchenko on Tuesday urged the National Bank of Ukraine to keep the hryvnia within a specified currency trading band, almost a month after such a policy had been de-facto abolished.

This is the second time that Yushchenko has raised the issue in less than three weeks, reflecting concerned over the hryvnia’s 4% appreciation against the U.S. dollar overnight May 21, breaching the previously declared band.

The hryvnia is now trading at about 4.85 hryvnias to the dollar, beyond the band of 4.95 to 5.25 to the dollar that the NBU has previously pledged to defend in 2008.

“The band is still there, but on the other hand the exchange rate that there is today has nothing to do with the band,” Yushchenko told a meeting with senior government and NBU officials.

“What kind of signal do we send to businesses? Are we still in the band position? Do we defend [the exchange rate]? Or we just look at it as a measure that has lost its urgency?” Yushchenko said.

Volodymyr Stelmakh, the governor of the NBU, earlier explained the move to let hryvnia strengthen by the need to slow down inflation, which had been running at 31.1% if measured between May and May 2007.

But Yushchenko suggested on May 30 that the NBU has been under political pressure to let the hryvnia strengthen in line with the calls from the government of Prime Minister Yulia Tymoshenko.

The NBU let the hryvnia appreciate on May 21, a day after a group of Tymoshenko lawmakers had submitted a bill to Parliament that de-facto cancels independence of the central bank and lets the government set the exchange rate policy.

Yushchenko, himself a long-time governor of the NBU, on Tuesday again emphasized the importance of keeping the independent policy by the central bank, and called for exchange rate stability.

“The NBU must always be beyond politics and must enjoy confidence,” Yushchenko said. “This must be a party that is not engaged in any biased processes.”

The NBU has split over the move with the Council, its strategic policy body, vehemently rejecting the appreciation decision, while the Board, its day-to-day operations body, pushing for the hryvnia’s strengthening. The Board overruled the Council in the appreciation decision.

The Council, which sets parameters of the currency trading band, has been previously considering whether to change the band to between 4.90 and 5.30 in 2008, but no decision had been yet approved.

Petro Poroshenko, the head of the Council, said recently that the body will soon decide whether to change the band or to cancel this policy completely. (tl/ez)