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UJ Week
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Nation    

PM says she’ll reshape NBU when president
Journal Staff Report

KIEV, Aug. 6 – Prime Minister Yulia Tymoshenko on Thursday vowed to drastically reshape the monetary and exchange rate policies of the National Bank of Ukraine in the event of her winning the presidency in January 2010.

Tymoshenko, who insists the hryvnia has been undervalued against the U.S. dollar, reacted to the continued weakening of the local currency over the past several weeks.

“After the presidential election--and I am sure we’re going to win the election--this [exchange rate policy] will be in our competence, because the president nominates the governor of the NBU,” Tymoshenko said in an interview with Channel 5.

Tymoshenko reacted to the hryvnia’s continued downward pressure against the dollar over the past several weeks. She alleged the developments had nothing to do with economic fundamentals, but had been rather indicating poor competence or even corruption at the NBU.

“I am convinced that everything will be fine with the exchange rate,” Tymoshenko said. “But right now, the way the NBU has been dealing with this issue, I do not have a sense of what they’re doing and how they influence the process. It’s hard to predict.”

The comments come a week after Tymoshenko had an emergency meeting with Volodymyr Stelmakh, the governor of the NBU, after the hryvnia had plunged beyond the rate of 8 hryvnias to the dollar.

The NBU, which has been keeping the official exchange rate at 7.7 hryvnias/dollar for most of this year, resorted to massive intervention, but had failed to stop the hryvnia’s decline.

The comment from Tymoshenko, who insists the hryvnia’s fair value is in the neighborhood of 6.5 hryvnias to the dollar, shows her meeting with Stelmakh has failed to produce any results.

The NBU shelled out $1.12 billion on currency interventions to support the hryvnia in July, according to the most recent report from the NBU, suggesting the hryvnia has been facing downward pressure throughout the past five weeks.

The report also shows that the people have been heavily purchasing hard currency in July, suggesting that mood on the currency market has been reflecting fears that the hryvnia may plunge.

The people bought $2.54 billion on the cash market in July, almost twice as much as they sold in the same period, according to the report posted by the NBU.

Meanwhile, due to lending from the International Monetary Fund, the NBU managed to boost its foreign exchange reserves to by 8.3% to $29.63 billion as of the end of July, the report said.

The weakening hryvnia poses a major threat to the Ukrainian banking system by making it more likely individual borrowers that have obtained hard currency loans over the past several years would default.

The hryvnia’s weakening to 8 hryvnias to the dollar would probably lead to between 20% and 30% of individual borrowers defaulting on their mortgage loans, industry analysts said.

Valeriy Lytvytsky, head of the group of advisors to the NBU governor, said recently that the central bank stands ready to sell $2.8 billion through interventions in August to calm down the markets. (tl/ez)




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Currencies (in hryvnias)
  22.03.2024 prev
USD 38.92 39.14
RUR 0.424 0.422
EUR 42.47 42.44

Stock Market
  21.03.2024 prev
PFTS 507.0 507.0
source: PFTS

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