By Natalia Zinets
KIEV Feb 27 Ukraine's hryvnia fell to a
new record low against the dollar on Thursday as investors kept
far away from a country in turmoil with a central bank stymied
by dwindling foreign currency reserves.
The political situation in Ukraine remained tense. Armed men
seized the regional government headquarters and parliament in
Crimea on Thursday and raised the Russian flag.
The currency was trading at 11.0 to the dollar on the
Reuters dealing platform, and forward markets were
pricing it to trade weaker at 11.65 per dollar in six months'
Ukraine's dollar bond maturing in June 2014 fell slightly to
93.94 cents to the dollar, although other
dollar bonds ticked higher on the prospect of Western financial
The hryvnia has been falling for weeks but has accelerated
since parliament stripped President Viktor Yanukovich of his
powers on Saturday.
"If we look at historical precedents, five years ago the
hryvnia was much stronger versus the U..S dollar. The economy
was in a better shape, foreign exchange reserves were almost
double current levels but the hryvnia depreciated almost 50
percent," said Tatyana Orlova, a strategist at RBS in London.
"If you take that as the benchmark it could go to 16 per
dollar," she said.
Ukraine's interim leaders have said they will put the
country back on course for European integration and a new
government is expected to be sworn in on Thursday. A
presidential election is due on May 25.
Kiev has also asked the International Monetary Fund to help
prepare a new financial aid programme as it tries to meet its
debt payments and an anti-crisis plan is being drawn up.
Ukraine's central bank does not plan to intervene in the
foreign currency market to defend the country's currency in the
coming days, the bank's governor, Stepan Kubiv, said on
Earlier, a senior official at the central bank
had said it had abandoned a managed exchange rate policy in
favour of a flexible currency..
Orlova said the hyrvnia could easily "overshoot" if the
central bank did not defend the currency but added: "A big
devaluation is not unjustified for the economy."