News / Economy

Ukraine's Currency Pays Price for Confrontation

A display shows currency exchange rates in central Kyiv, Feb. 4, 2014.
A display shows currency exchange rates in central Kyiv, Feb. 4, 2014.
Reuters
— Ukraine's acting prime minister blamed confrontation on the streets for a 10 percent slide in the currency since November that drove the hryvnia below nine to the dollar on Wednesday for the first time in five years.
 
For many analysts, it suggested the central bank would no longer prop up the currency amid a fight over Ukraine's future.
 
Torn between the European Union and Moscow since President Viktor Yanukovich spurned an EU trade deal in favor of Russian aid, Ukraine's leader was offered more carrots and sticks from east and west as he debated who may replace the pro-Russian premier he removed last week in a bid to appease his critics.
 
EU diplomacy chief Catherine Ashton, meeting Yanukovich and opposition leaders separately in Kyiv, urged them to hasten attempts to resolve a sometimes violent standoff and promised European economic and technical help to help with reforms.
 
Riot police officers take position outside Kyiv's Independence Square, the epicenter of the country's current unrest, Ukraine, Feb. 1, 2014.Riot police officers take position outside Kyiv's Independence Square, the epicenter of the country's current unrest, Ukraine, Feb. 1, 2014.
x
Riot police officers take position outside Kyiv's Independence Square, the epicenter of the country's current unrest, Ukraine, Feb. 1, 2014.
Riot police officers take position outside Kyiv's Independence Square, the epicenter of the country's current unrest, Ukraine, Feb. 1, 2014.
The European Parliament, where lawmakers criticized the Ukrainian authorities for violence toward protesters and dozens of arrests, prepared to call on Thursday for sanctions - a call EU states are unlikely to heed at this stage in the hope that Yanukovich will choose to appoint a consensus government.
 
The U.S. ambassador to Ukraine, speaking ahead of a visit this week by a senior State Department official, also warned that U.S. economic sanctions would follow swiftly if Yanukovich tried to clear central Kyiv's Maidan protest camp by force.
 
In Moscow, President Vladimir Putin's spokesman assured Ukraine that Russia would not review its terms for vital gas supplies - as long as Kyiv put right a growing pile of unpaid bills that was causing “concern” in the Kremlin.
 
It was a reminder, if one were needed, of how far Ukraine depends on Russian goodwill since Yanukovich agreed to take a $15-billion package of loans and cheaper gas. Russia froze payouts last week when Prime Minister Mykola Azarov stepped down and is waiting to see the color of the new government.
 
Yanukovich is expected to meet Putin at the opening of the Winter Olympics in Sochi on Friday - giving the Russian leader an opportunity for a private update on who will get the job.
 
A parliamentary ally of Yanukovich, whose power base lies among the industrial magnates of Ukraine's Russian-speaking eastern regions, said on Wednesday that the president might say next week who will take over as prime minister.
 
Currency Slide
 
Serhiy Arbuzov, the deputy premier currently heading the government on an interim basis, insisted the Ukrainian economy was in good shape and blamed politics for the weaker currency.
 
“Political instability is putting pressure on the currency market. There is tension despite a lack of economic reasons for this,” he told the cabinet in televised remarks.
 
“Every day of confrontation and a lack of desire to find a compromise weakens our country economically.”
 
In support of his argument that there was no economic cause for concern, he cited new data showing the balance of payments moved into a surplus of $2 billion by the end of last year.
 
The data indicate, however, that this was due to Russia buying $3 billion of eurobonds in December, as agreed with Putin. The broader current account deficit grew by 13 percent last year to $16.141 billion.
 
The central bank used reserves to try to maintain a stable peg for the hryvnia against the dollar and did so again on Wednesday, offering to auction dollars at 8.7 hryvnias. But on the interbank market, the rate fell 3 percent to below 9 - 10 percent weaker than before the EU deal collapsed in November.
 
Many analysts suggested the central bank was now giving up its efforts to hold the rate and that a drop to 10 per dollar or less could benefit the economy by making Ukraine's exports more competitive.
 
The indicative daily fixing rate, according to Thomson Reuters data, was 9.0850 hryvnias per dollar compared to Tuesday's 8.8025. The last time it fell below 9 per dollar was in February 2009, during a volatile period in the early months of the international financial crisis.
 
Bank of American Merrill Lynch analysts said the central bank seemed to have “abandoned” its peg. They forecast a rate of 10 hryvnias per dollar for this year, and hence a reduction in the current account deficit “to a more sustainable 3 percent of GDP”.
 
Tug-of-War
 
The European Union and United States have stressed they do want to partake in a “bidding war” with Russia for Ukraine, a huge territory of 46 million which Putin wants to join a customs union with other former Soviet republics. But both Brussels and Washington are urging closer relations on Kyiv.
 
Ashton said she believed a “Ukrainian-led process” of compromise and reform was possible to overcome the deadlock that has raised fears of instability spreading.
 
But, suggesting frustration at the lack of real compromise between the authorities and the opposition, she added: “What I really need to feel is a growing sense of momentum on this. I think that that is where we need to see more work.”
 
She played any suggestion there were “large dollops of money” on offer from the EU, but stressed broader cooperation.
 
U.S. Ambassador Geoffrey Pyatt told a Kyiv television channel that Washington welcomed Yanukovich's repeal last week of “black laws” aimed at curbing demonstrations and his dismissal of Azarov's government.
 
“We hope,” he added, ”That he will now take additional steps to rebuild consensus ... and build a broad technical government that can focus on returning Ukraine to political and economic health.”

You May Like

EU Court Fines Poland for Hosting CIA 'Black Sites'

Ruling is first time a court has acknowledged suspects were held and tortured at the sites, under US program launched following the 9/11 terrorist attacks More

Migrant Issues Close to Home Spur Groups to Take Action

Groups placing water, food in the desert, or aiding detainees after release, have one common goal: no more deaths of migrants crossing illegally into the US More

Video At AIDS Conference, Prevention Pill Stirs Excitement

Truveda shows promise, spurring debate over access and other approaches More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Treatment for Childhood Epilepsy Heats up Medical Marijuana Debatei
X
Shelley Schlender
July 24, 2014 6:43 PM
In the United States, marijuana is classed as an illegal drug by the federal government. But nearly half the states have legalized it, to some degree. Proponents say some strains of marijuana might have exceptional health benefits, for treating pain or inflammation in chronic conditions such as cancer, multiple sclerosis and epilepsy. Shelley Schlender reports on a strain of medical marijuana developed in Colorado that is reputed to reduce seizures in childhood epilepsy
Video

Video Treatment for Childhood Epilepsy Heats up Medical Marijuana Debate

In the United States, marijuana is classed as an illegal drug by the federal government. But nearly half the states have legalized it, to some degree. Proponents say some strains of marijuana might have exceptional health benefits, for treating pain or inflammation in chronic conditions such as cancer, multiple sclerosis and epilepsy. Shelley Schlender reports on a strain of medical marijuana developed in Colorado that is reputed to reduce seizures in childhood epilepsy
Video

Video Airbus Adds Metal 3D Printed Parts to New Jets

By the end of this year, European aircraft manufacturing consortium Airbus plans to deliver the first of its new, extra-wide-body passenger jets, the A350-XWB. Among other technological innovations, the new plane will also incorporate metal parts made in a 3-D printer. VOA's George Putic has more.
Video

Video Death Toll From Israel-Gaza Conflict Surpasses 700

Gaza officials say a shelling hit a compound housing a United Nations-run school in the Gaza Strip, killing more than a dozen people, during an Israeli offensive in the area. Heavy fighting between the Israeli military and Hamas militants continued on Thursday, pushing up the death toll. So far, more than 730 Palestinians and 35 Israelis have been killed in the conflict. VOA's Scott Bobb has the latest from Jerusalem.
Video

Video AIDS Conference Welcomes Exciting Developments in HIV Treatment, Prevention

Significant strides have been made in recent years toward the treatment and prevention of HIV, the virus that causes AIDS. This year, at the International AIDS Conference, the AIDS community welcomed progress on a new pill that may prevent transmission of the deadly virus. VOA’s Anita Powell reports from Melbourne, Australia.
Video

Video Israel Targets Gaza Supply Tunnels

The Israeli military has launched a ground operation in Gaza to destroy the myriad tunnels that may have been used to smuggle weapons to Hamas. VOA's Zlatica Hoke reports that could mean more hardship for the people of Gaza, who obtain some of their essential supplies through these underground passages
Video

Video Researchers Target Low-Cost Avatar Technology

Scientists at the University of Southern California Institute for Creative Technologies say 3-dimensional representations could revolutionize social media. Elizabeth Lee has more from Los Angeles.
Video

Video IAEA: Iran Turns its Enriched Uranium Into Less Harmful Form

Iran has converted its stockpiles of enriched uranium into a less dangerous form that is more difficult to use for nuclear weapons, according to the United Nations’ Atomic Energy Agency. The move complies with an interim deal reached with Western powers on Iran's nuclear program last year, in exchange for easing of sanctions. Henry Ridgwell reports for VOA from London.
Video

Video In Cambodia, HIV Diagnosis Brings Deadly Shame

Although HIV/AIDS is now a treatable condition, a positive diagnosis is still a life altering experience. In Cambodia, people living with HIV are often disowned by friends, family and the community. This humiliation can be unbearable. We bring you one Cambodian woman’s struggle to overcome a life tragedy and her own HIV positive diagnosis.

AppleAndroid

World Currencies

EUR
USD
0.7305
JPY
USD
101.53
GBP
USD
0.5830
CAD
USD
1.0656
INR
USD
60.075

Rates may not be current.