Currency market sinks into Christmas Eve stability

NBU Governor Viktor Yushchenko declared that toward the end of the week the bank would introduce a new official hryvnia exchange vehicle.

The gist of the innovation, in his words, is that the exchange rate will be set proceeding from the previous day’s interbank rate, and not the way it was done previously, relying on the rate determined using bank transactions performed two days ago. The old method, Mr. Yushchenko admitted, caused the NBU to declare the official exchange rate “no longer used by the market,” reports Interfax Ukraine.

Simultaneously, Ukraine’s number one banker confirmed his intention to change foreign exchange bidding rules, stressing that he is not going to levy any administrative restrictions. Meanwhile, Ukrayinski Novyny says Ukrainian bankers believe NBU may hold a special time-limited foreign exchange trade session on the interbank market, thus placing business under control (bidding lasts all day, practically out of NBU control).

Petro Andrushchenko, Deputy Chairman of the Board, Ukrsotsbank, told The Day, “I think that there is more talk than effect. Unless we have a more stable economic policy, we will achieve nothing. There must be a clearly formulated action program. So far there is nothing from the National Bank and the government’s economic bloc. As for the steps we hear about, they’re all written for the same purpose. We must act not in separate directions, but comprehensively, with regard to the economic policy as a whole and then we will have an effect.”

Of course, Mr. Yushchenko is as aware as other bankers of the complexity of tasks involved in the improvement of the economic, particularly foreign currency policy. In fact, he says that the latter must be “as elastic and rigid as are the adequate budget and structural policies.” The Day’s experts believe that Viktor Yushchenko is trying to find a way out of the situation using a small step tactic with a definite administrative touch to it, also because he needs constantly to demonstrate certain reformist moves.

Muhammed Shadman-Valavi, head of the IMF mission, returned to Ukraine for a second round of talks. The first round in Washington with President Kuchma proved ineffective. Presidential Aide Valery Lytvytsky told Ukrayinski Novyny that the current mission will not recommend the IMF Board continue financing and that talks will continue.

In view of all this, considering Deputy Premier Serhiy Tyhypko’s resent critical statements and the situation in the energy sector and on the fuel market, threatening the stable exchange rate, Mr. Yushchenko wrote a prescription for Ukraine, which is apparently meant primarily for the IMF, “I ask you to please have an optimistic view” (courtesy of Ukrayinski Novyny). Indeed, after Viktor Yushchenko met with bankers the hryvnia rate strengthened by 6% Monday and Tuesday, while on previous five days it plummeted 16.6%. Yet everyone sees what he wants to see, including the IMF.