Ukrainian Hryvnia Drop After Low Chances of Cease Fire

Ukraine’s currency lost nearly 5 percent of its value on Monday after a weekend that saw the heaviest shelling in a month hit the main rebel stronghold in the east and signs that Moscow had dispatched troops and tanks to reinforce separatists.

The prospect that a two-month-old ceasefire could collapse and all-out war return to eastern Ukraine has weighed down the economy and helped drive the currency 12 percent lower since the central bank abandoned an unofficial peg a week ago.

The country of 46 million people is near bankruptcy, dependent on international loans, and deeply in debt for natural gas to Russia, the former imperial master it accuses of waging war on behalf of separatists on its territory.

The central bank offered to sell dollars on Monday at 15.2 hryvnias to the dollar, an all-time low and 4.8 percent lower than the last auction on Friday.

The bank abandoned a peg of 12.95 to the dollar a week ago, leaving the currency in free-fall. It said on Monday it believed the fall would now stop and the currency would settle between 15 and 16 to the dollar.

After fighting over the summer that killed 4,000 people, a truce has largely held between government forces and separatists in the east. But it appears to be fraying in recent days.

Kiev says Moscow has sent an armored column of additional reinforcements to aid the pro-Russian separatists in enclaves populated mainly by Russian-speaking ethnic Ukrainians, which the Kremlin now refers to as “New Russia”.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza