Falling international reserves, chronic current account deficits and a drop in international metal and ore prices have long convinced experts that devaluation was a question of when, not if. Some even argue it is the only way Ukraine can regain some of the competitiveness it lost to its neighbors. Over the past three months, the hryvnia has lost marginally to the dollar, but has gained relative to some regional currencies, 8.7 percent on Poland’s zloty, for example.
Nonetheless, memories of the 40 percent devaluation in 2009 have scarred Ukrainians. Thus, the relatively small jump in the exchange rate in days running up to Sept. 4 was enough to rattle nerves. During that period, the hryvnia slid at street side currency booths from around 8 relative to the US dollar, to above 8.2.
Investment banks currently estimate an end-year exchange rate of 8.5-8.9, highlighting that the banking sector is much more resilient than it was three years ago. Nonetheless, knowing that herd mentality could easily turn a trickle into a flood, government officials were quick to point fingers and try to reassure the population.