KIEV, April 23 – The National Bank of Ukraine may soon let the hryvnia gain more value against the U.S. dollar by increasing the range within which the national currency is allowed to fluctuate.
Volodymyr Stelmakh, the governor of the NBU, said the bank’s strategic monetary policy setting body, the Council, will meet on Thursday to decide on the new range.
“The [expansion of the range] is a wise thought, but what is needed is the budget to be ready for it,” Stelmakh told reporters in Kiev on Wednesday. “This is what lies on the surface.”
The hryvnia is currently allowed to trade within the range of 4.95 to 5.25 to the dollar, but it has been performing strongly over the past 36 months, mostly staying at 5.05 to the dollar.
The comment is the first indication that the hryvnia may be allowed to rapidly appreciate against the dollar, a move that may help the government fight high inflation.
Prime Minister Yulia Tymoshenko, who had been supporting the strong hryvnia policy, on Wednesday indicated the government and the NBU were on track to make the policy switch.
“The hryvnia will not become weaker, because both the government and the NBU are conducting the right policies,” Tymoshenko said at a press conference.
“You know, even international bankers are not able to give an answer about [exchange rates],” Tymoshenko said. “But I know little something about the trends, so I suggest you to keep savings in the national currency.”
This is the first time that Tymoshenko praised the policy of the NBU, a month after making very critical comments about the central bank’s monetary and exchange rate policies.
The comment suggests the government and the NBU may have finally found a compromise that would allow the hryvnia to gain value against the dollar, analysts said.
The International Monetary Fund and the World Bank have been advising Ukraine to let the hryvnia gain more value against the dollar, a move that is expected to allow curbing inflation.
The NBU has de-facto tested the policy earlier this month by letting the hryvnia strengthen to 4.905 to the dollar in trading between commercial banks, while keeping the official exchange rate at 5.05 to the dollar. (tl/ez)