Ukraine’s biggest interest-rate increase since 1998 is unlikely to stem the world’s worst currency selloff, according to Rareview Macro LLC and JHS Capital Advisors Inc.
While the hryvnia erased losses yesterday after the central bank raised its benchmark rate by 3 percentage points to 9.5 percent, the move will have a muted impact in coming weeks because investors are more focused on the country’s ability to refinance foreign debt than on the returns they can get in the local market, said Neil Azous, founder of Stamford, Connecticut-based research firm Rareview Macro.
Policy makers in Kiev said the rate increase, which is their first in six years and the biggest since Russia’s debt default in 1998, is aimed at stemming currency declines that threaten to boost inflation and disrupt money markets. Investors are pulling their money from Ukraine, eroding foreign reserves, as concern mounts that Russia will try to seize more of its territory after annexing the Crimea region last month.
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