The Central bank will not intervene at the forex, Head of the Bank said

UKRAINE - In Brief 26 Feb 2014 by Dmytro Boyarchuk
The Central bank will not use its gross foreign reserves to balance forex market, the Head of Central Bank Stepan Kubiv said today. It is not clear whether this statement means the Bank will move to real free float. However, it means that new head of the Bank will not resist devaluation over the upcoming weeks. In fact this decision of Stepan Kubiv is not a surprise after his claim that gross foreign reserves have already declined to $15 billion from $17.8 billion reported by the end of January. With such speed of foreign cash outflow (and possibly some reforms ahead) it’s quite logical for the Central bank to step aside and allow the spring of devaluation unclenched. Today hryvnia already broke 10.5 hryvnia per $1 level. Most likely it will move down further. Still we see 10 hryvnia per $1 as balanced level and for the moment we consider any other devaluation as overshooting effect. In any case the future of national currency is dependent on efficiency of new government and its ability to run ‘shock therapy’ for the economy. Also it is important to have clear vision of the Central bank policy – unfortunately, for the moment we have only some statements of Stepan Kubiv without comprehensive picture to understand his approach.

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