Archive for August 23rd, 2011

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Fluctuating currency

August 23, 2011

Fluctuating currency?

According to Bloomberg who quote Yuri Kobolov, Deputy Governor of the National Bank of Ukraine, the Ukrainian Hryvnia will fluctuate no more than 2% – 5% in the next two years.

The Hryvnia is currently UAH 8 to $1 (or close enough to make no difference to the average person on the street). Ergo a 40 kopekee rise or fall against the US$ for the next two years or an extreme corridor of 80 kopekee.

The question is will the NBU intervene to weaken the Hyrvnia against the US$ for export purposes or strengthen it as most of Ukraine’s current growth is domestically driven due to the weak global economy. Strengthening it will of course also make all those still repaying US$ denominated loans from the bubble era the opportunity to repay said loans a little closer to the Hryvnia value when they took them on.

There is a lot to be said for debt reduction these days, so will we see the Hrynia go to 7.60 to US$1 over the next two years whilst also encouraging those with money to spend a little more?

A far cry from the heady (and false) days of Hrynia 4.5 – 5.0 against the US$ 1, but that bubble has long since burst.

There is also the matter of the official inflation rate creeping towards 10% during this time to consider. (Unofficially that rate is of course much higher.)

As an exporting nation with the past year’s growth fairly reliant on domestic demand due to global conditions, what would you do?

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