You're reading: Hryvnia hits new low before rallying

The national currency reached a new low of Hr 11.20-11.80 to the U.S. dollar on the Interbank Currency Exchange at 12:46 on Feb. 27 before bouncing back slightly to close at Hr 10.80-11.20. New Prime Minster Arseniy Yatseniuk has stated that returning stability to the banking system is one of his government’s priorities.

The hryvnia has been in near freefall since the onset of the deadly phase of EuroMaidan on Feb. 17. During that week alone, Ukrainians withdrew $3.1 billion from deposits, causing the central bank to intervene by spending $2.8 billion to keep the currency afloat, or 15.7 percent of the nation’s hard currency reserves, the online daily zn.ua reports. This leaves the National Bank of Ukraine with just $15 billion in reserves. In parliament on Feb. 27 Yatseniuk stated that just three years ago the NBU had reserves of $37 billion.

The ongoing withdrawal of cash from the banking system is part of the reason for the hryvnia’s precipitous decline. Another reason is that the NBU stopped intervening on the market Feb. 25-26, Yatseniuk said, and intervention might have retarded the slide. At the onset of EuroMaidan on Nov. 21 the interbank exchange rate was Hr 8.4 to the U.S. dollar, but by Feb. 17 it had slipped to Hr 9.1 on the Interbank Currency Exchange.

The official National Bank of Ukraine exchange rate, meanwhile, jumped from Hr 9.04 to the U.S. dollar on Feb. 25 to Hr 9.43 on Feb. 26 and Hr 9.52 as of Feb. 27.

A prolonged downward spiral will lead to another run on banks, inflation, and difficulties among businesses that rely on imports, especially considering the current account deficit, experts warned. Already the cost of motor fuels rose by Hr 0.26-0.29, or around 2 percent on Feb. 27, the online business daily rbc.ua reports.

Kyiv Post business journalist Evan Ostryzniuk can be reached at [email protected]