August 8, 2014 / 4:10 PM / 6 years ago

UPDATE 1-Ukraine's central bank says will prevent any excessive hryvnia fall

(Releads with central bank chief’s comments)

KIEV, Aug 8 (Reuters) - The National Bank of Ukraine will keep selling dollars on the local foreign exchange market and using other means to prevent excessive volatility in the hryvnia, its head said on Friday.

After a six-month break, the central bank this week resumed its intervention to stop any further hryvnia falls, central bank chief Valeria Hontareva said, due to political instability as Kiev forces fight separatists in the east.

In the first quarter the Ukrainian currency lost about 30 percent of its value and authorities say there are no macroeconomic reasons for a further fall as the trade deficit decreased significantly in January-May.

“The National Bank ... will not allow the market to wind up this flywheel. We will not be a passive participant. We can carry on (with interventions) to smooth out the market,” she told journalists.

On Friday the central bank offered to sell dollars at a price of 12.60 hryvnia, compared with 12.26 hryvnia on Tuesday.

The hryvnia was quoted at 12.4950 to the dollar at around 0845 GMT, after closing at 12.45 hryvnia on Thursday.

Hontareva did not exclude the central bank using some administrative measures if it failed to calm the market by interventions.

“Let’s see how the market will react to the fact that now we are intervening,” said Hontareva.

“Since we can not carry big interventions (in the currency), but at the same time having to stop the situation unravelling, we will have to apply administrative measures in the future,” she said.

Hontareva did not elaborate on what kind of administrative measures might be used.

The central bank prospects of selling foreign currency on the market are limited by the size of its foreign reserves which have shrunk to $16.07 billion from $38.4 billion over the past three years, as well as by the requirements of the International Monetary Fund (IMF) stand-by programme.

Ukraine is to receive $17.1 billion credit over two years under an IMF programe.

Ukraine received the first tranche of $3.2 billion in May and expects that a decision on disbursement of a second $1.4 billion tranche of aid will be adopted on Aug. 29.

Under the programme, the central bank must follow the principles of a flexible exchange rate and avoid reducing the reserves below the level agreed with the Fund.

“Today, I hope that we can do without the additional administrative measures”, said Hontareva. (Reporting by Natalia Zinets; Editing by Richard Balmforth and Louise Ireland)

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