KIEV, July 4 – The National Bank of Ukraine Friday pledged to keep the hryvnia from appreciating or falling against the U.S. dollar more than 4% this year, ending six weeks of uncertainty over its exchange rate policy.

The pledge, a compromise between the NBU’s two conflicting policy bodies, means the hryvnia will be allowed to trade between 4.65 and 5.05 hryvnias to the dollar through the end of the year.

This replaces a previous currency trading band of 4.95 and 5.25 to the dollar that was supposed to be in effect through end-2008, but had been unexpectedly cancelled by the NBU’s Board May 21.

“As of today, we have an absolutely united position concerning the exchange rate policy,” Petro Poroshenko, the head of the NBU’s Council, a strategic policy body, said at a press conference Friday. “The official exchange rate will be 4.85 [to the dollar] with possible deviation of plus-minus 4%.”

At the press conference, Poroshenko appeared alongside with Volodymyr Stelmakh, the governor of the NBU and representing the Board, which runs the bank’s day-to-day operations.

For the past six weeks the Board and the Council have been bitterly split over the exchange rate policy. The split came after the Board, ignoring the Council, had let the hryvnia appreciate 4% against the dollar overnight on May 21, de-facto abolishing the decade-long trading band policy.

The new pledge to keep the hryvnia within 4.65 and 5.05 to the dollar ends speculations that the NBU’s Board may have been seeking to introduce free floating exchange rate policy.

The NBU has earlier signed a memorandum with the government of Prime Minister Yulia Tymoshenko calling for the introduction of the hryvnia’s free float. But the clause has been later criticized by many business executives concerned that the policy may hurt Ukraine’s steel sector, the country’s main exporters, by leading to the hryvnia’s sharp appreciation.

“The Council decided today that it would be premature to switch to the free floating exchange rate policy,” Stelmakh said. “Our businesses need to be given signals.”

The compromise between the Board and the Council came two days after sharp criticism from President Viktor Yushchenko, who had backed the idea of introducing the new currency trading band.

Yushchenko, himself a long-time governor of the NBU, heavily criticized Stelmakh at a high profile meeting in his office aimed at discussions over the government’s economic policy. (tl/ez)