Experts: Ukraine needs to devalue national currency.

By bne IntelliNews August 28, 2012
Ukraine that is preparing for upcoming parliamentary elections will have to devalue national currency in the next few month, in order to support competitiveness of exports and prevent the growth of foreign trade deficit, believe the monthly survey participants of Reuters. The hryvnia exchange rate (that devalued by almost 60% in 2008) remained stable at UAH 8/USD 1, thanks to support of the National Bank of Ukraine (NBU). Moreover, since the beginning of 2012, the NBU has spent around USD 2.5bn on currency interventions (USD 3.7bn in total 2011). At the moment, it is enough to reduce hryvnia against the dollar by 10-15% to 8.8-9.2 UAH-USD, Eric Nyman of Capital Times believes. Analysts claim that the decline of hryvnia is inevitable and the only question is whether it will happen in December or in the first months of next year. The currency exchange rate is stable not because of economic reasons, but thanks to the NBUs ability to support it. If the economic situation changes to the worse, the fall in the NBUs reserves may reach critical level, when the devaluation will be inevitable, believes Dmitriy Fedotkin, VTB capital.

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