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.
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.
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”.
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

Pakistan Among Developing Countries Hit Hard by Global Warming

Pakistani officials hope developed nations agree to scale back emissions, offer help in dealing with climate change

Video Speed, Social Media Shape Counterterrorism Probes

Speed is critical in effort to prevent subsequent attacks; demographics of extremists lend themselves to communicating, establishing profiles on digital platforms

Islamic State Oil Trade Seduces Friends, Foes Alike

Terrorist group rakes in up to $500 million a year in sales to customers such as Syrian government, US-supported rebels and Turkey

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Social Media Aids Counter-Terrorism Investigationsi
Katherine Gypson
December 01, 2015 10:06 PM
In the aftermath of the Paris attacks, officials carried out waves of raids and arrests to break up terror cells. As VOA's Katherine Gypson reports, social media can be a key tool for investigators.

Video Social Media Aids Counter-Terrorism Investigations

In the aftermath of the Paris attacks, officials carried out waves of raids and arrests to break up terror cells. As VOA's Katherine Gypson reports, social media can be a key tool for investigators.

Video Russia Marks World AIDS Day With Grim News

While HIV infection rates have steadied or even declined in many European countries, the caseload has grown rapidly in Russia, as VOA's Daniel Schearf reports from Moscow. Over half of the new infections were transmitted through injection drug use.

Video Pakistan Hit Hard by Global Warming

As world leaders meet in Paris to craft a new global agreement aimed at cutting climate-changing greenhouse-gas emissions, many developing countries are watching closely for the final results. While most developing nations contribute much less to global warming than developed countries, they often feel the effects to a disproportionate degree. As Saud Zafar reports from Karachi, one such nation is Pakistan. Aisha Khalid narrates his report.

Video With HIV, Can We Get to Zero?

The theme of this year's World AIDS Day is "Getting to Zero." The U.N. says new HIV infections have been reduced by 35 percent since 2000 and AIDS-related deaths are down by 42 percent since the peak in 2004. VOA's Carol Pearson takes a look at what it might take to actually have an AIDS-free generation.

Video Political Motives Seen Behind Cancelled Cambodian Water Festival

For the fourth time in the five years since more than 350 people were killed in a stampede at Cambodia’s annual water festival, authorities canceled the event this year. Officials blamed environmental reasons as the cause, but many see it as fallout from rising political tensions with a fresh wave of ruling party intimidation against the opposition. David Boyle and Kimlong Meng report from Phnom Penh.

Video African Circus Gives At-Risk Youth a 2nd Chance

Ethiopia hosted the first African Circus Arts Festival this past weekend with performers from seven different African countries. Most of the performers are youngsters coming form challenging backgrounds who say the circus gave them a second chance.

Video US Lawmakers Brace for End-of-Year Battles

U.S. lawmakers are returning to Washington for Congress’ final working weeks of the year. And, as VOA's Michael Bowman reports, a full slate of legislative business awaits them, from keeping the federal government open to resolving a battle with the White House over the admittance of Syrian refugees.

Video Taiwan Looks for Role in South China Sea Dispute

The Taiwanese government is one of several that claims territory in the hotly contested South China Sea, but Taipei has long been sidelined in the dispute, overshadowed by China. Now, as the Philippines challenges Beijing’s claims in an international court at The Hague, Taipei is looking to publicly assert its claims. VOA’s Bill Ide has more from Beijing.

Video After Terrorist Attacks, Support for Refugees Fades

The terrorists who killed and injured almost 500 people around Paris this month are mostly French or Belgian nationals. But at least two apparently took advantage of Europe’s migrant crisis to sneak into the region. The discovery has hardened views about legitimate refugees, including those fleeing the same extremist violence that hit the French capital. Lisa Bryant has this report for VOA from the Paris suburb of Cergy-Pontoise

Video Syrian Refugees in US Express Concern for Those Left Behind

Syrian immigrants in the United States are concerned about the negative tide of public opinion and the politicians who want to block a U.S. plan to accept 10,000 Syrian refugees. Zlatica Hoke reports many Americans are fighting to dispel suspicions linking refugees to terrorists.

Video Thais Send Security Concerns Down the River

As Thailand takes in the annual Loy Krathong festival, many ponder the country’s future and security. Steve Sandford reports from Chiang Mai.

Video Islamic State Unfazed by Losses in Iraq, Syria

Progress in the U.S.-led effort to beat Islamic State on its home turf in Iraq and Syria has led some to speculate the terror group may be growing desperate. But counterterror officials say that is not the case, and warn the recent spate of terror attacks is merely part of the group’s evolution. VOA National Security correspondent Jeff Seldin has more.

VOA Blogs

World Currencies


Rates may not be current.