| Businessweek | - |
The
hryvnia fell for a second day as the death toll from violence in
eastern Ukraine mounted and Russia demanded the nation postpone
elections.
Bloomberg News
Hryvnia Weakens as Ukraine Death Toll Mounts; Stocks Rebound
The hryvnia fell for a second day as
the death toll from violence in eastern Ukraine mounted and
Russia demanded the nation postpone elections. Stocks reversed
losses in Kiev.
The hryvnia weakened 1.4 percent to 11.80 per dollar by
6:30 p.m. in the capital. That takes a slump this year to 30
percent, the steepest among global currencies tracked by
Bloomberg. The Ukrainian Equities Index (UX) rose 1.4 percent after
earlier sinking 1.6 percent and government bonds climbed as
Russian Foreign Minister Sergey Lavrov called for talks to quell
the crisis. Four Ukrainian servicemen died yesterday in fighting that may have killed about 30 rebels, acting Interior Minister Arsen Avakov said on his Facebook account. The nation should delay a presidential vote scheduled for May 25, Lavrov also said today. Pro-Russia separatists are planning to hold a referendum in the Donetsk region on May 11.
“The situation in Ukraine seems to be going from bad to worse,” Neil Shearing, chief emerging-markets economist at Capital Economics Ltd., said by phone from London today. “Further selloffs and market turbulence” may transpire as the Donetsk referendum and elections “could be flashpoints for further trouble,” he said.
The yield on Ukraine’s dollar-denominated notes maturing in April 2023 fell nine basis points, or 0.09 percentage point, today to 10.73 percent, compared with 8.68 percent a month ago. The rate reached a seven-week high of 10.84 percent on May 2, closing prices compiled by Bloomberg show.
Ukrainian equities ended a six-day stretch of losses that dragged the index to a four-week low. The Warsaw Stock Exchange WIG Ukraine Index of stocks traded in Warsaw decreased 1.2 percent to the weakest level since March 14 today.
IMF Bailout
Ukraine is mired in the worst standoff between the West and Russia since the end of the Cold War after Kremlin-backed Viktor Yanukovych was ousted as president and a pro-European government took office Feb. 27.The deadly violence is eclipsing optimism that a $17 billion loan program approved by the International Monetary Fund last month will help the nation avert a default as its economy slips into a recession. Foreign-currency reserves have tumbled to a nine-year low of $15 billion, prompting the central bank to abandon a peg to the dollar in February.
Strengthening Sentiment
Ukraine expects the first IMF payment of about $3.2 billion in the coming days and will use more than $1 billion to boost its foreign-exchange and gold reserves, Governor Stepan Kubiv said in a statement yesterday. The funds will improve investor sentiment toward Ukraine and “strengthen the stability of the hryvnia,” he said.The central bank raised its key interest rate last month to curb the hryvnia’s depreciation after it tumbled to a record low against the greenback on April 11.
Traders are betting the currency will weaken to 12.775 per dollar in three months, according to non-deliverable forward contract data compiled by Bloomberg.
“The political situation constitutes the main risk for the currency,” Thu Lan Nguyen, a foreign-exchange strategist at Commerzbank AG in Frankfurt, wrote in an e-mailed report. “Should the situation in eastern Ukraine escalate, not even the most aggressive rate hike will be able to help the hryvnia.”
To contact the reporters on this story: Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net; Natasha Doff in London at ndoff@bloomberg.net
To contact the editors responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net; Daliah Merzaban at dmerzaban@bloomberg.net Zahra Hankir, Ash Kumar
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