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08KYIV2028, UKRAINE: NBU INTERVENES TO SLOW HRYVNIA CURRENCY SLIDE

October 14, 2008

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Reference ID Created Released Classification Origin
08KYIV2028 2008-10-14 06:55 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Kyiv

VZCZCXRO4907
RR RUEHIK RUEHLN RUEHPOD RUEHVK RUEHYG
DE RUEHKV #2028 2880655
ZNR UUUUU ZZH
R 140655Z OCT 08
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC 6529
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCNCIS/CIS COLLECTIVE
RUEHZG/NATO EU COLLECTIVE

UNCLAS KYIV 002028 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EUR/UMB, EB/OMA 
USDOC FOR 4231/ITA/OEENIS/NISD/CLUCYK 
TREASURY PLEASE PASS TO TTORGERSON 
 
E.O.:  12958:  N/A 
TAGS: ECON EFIN UP XH
 
SUBJECT:  UKRAINE:  NBU INTERVENES TO SLOW HRYVNIA CURRENCY SLIDE 
 
CORECTED COPY:  CORRECTED PARA MARKINGS 
REF: A) KYIV 1995 B) KYIV 1959 
 
Sensitive But Unclassified.  Not for Internet Distribution. 
 
1.  (U) Responding to the weakening hryvnia (UAH), National Bank of 
Ukraine (NBU) Council Chairman Petro Poroshenko on Tuesday announced 
that the official exchange rate for this year would be changed to 
UAH 4.95/$ plus or minus 8 percent from the previous UAH 4.85/$ plus 
or minus 4 percent.  Despite the announcement, the UAH continued its 
slide yesterday, trading in the morning between UAH 5.60 to UAH 5.80 
to the U.S. dollar on the interbank currency market, well outside 
the new "official" exchange rate. 
 
2.  (U) The NBU Council pronouncement of a new policy was only 
advisory, as ultimate monetary policy authority rests with the NBU 
Board of Governors and its head Volodymyr Stelmakh.  There was no 
evidence during the morning yesterday that the NBU would intervene 
in the currency market in an attempt to implement the new "official" 
policy.  However, at noon on Wednesday, the NBU announced that it 
would sell U.S. dollars at an exchange rate of UAH 5.0/$.  Contacts 
in the banking community confirmed that the NBU was selling to 
commercial banks at the announced UAH 5.0/$ rate, but in quantities 
less than 50 percent of that requested by the commercial banks. 
Following the NBU's action, the interbank exchange rate declined to 
UAH 5.50/$ for those who could not fulfill their dollar needs buying 
from the NBU. 
 
3.  (SBU) Comment:  The NBU's actions in the market yesterday were 
clearly an attempt to bring some stability to a quick moving 
currency market that was being driven in part by speculators.  The 
NBU has not announced whether it plans further interventions, though 
its $37 billion in foreign reserves certainly are sufficient at this 
time to allow future interventions if the NBU chooses to make them. 
Over the longer term, however, NBU interventions in the market could 
prove futile, especially in the context of the global financial 
crisis and other external factors bearing down on Ukraine's economy. 
 End comment. 
 
TAYLOR

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