Ukraine: Ukrainian hryvnia hits new record low, rebounds on IMF optimism
March 9, 2015
The Ukrainian hryvnia (UAH) continued to plunge in value against the U.S. dollar in recent weeks amidst the ongoing military conflict in the country. On 26 February, the UAH reached a new all-time low against the greenback, ending the day at 33.75 UAH per USD, which represented a 108.2% depreciation over the same day of the previous month. The drastic plunge in the value of the hryvnia came after the Central Bank announced, on 25 February, a temporary ban on all currency trading. The ban was lifted overnight after fierce criticism from Prime Minister Arseny Yatseniuk. In addition, the rapid deterioration of the value of the hryvnia has resulted from the ongoing military conflict between the government and pro-Russia rebels in the eastern regions of Ukraine, combined with the country’s economic woes. The UAH has been under pressure for months and exhibited extreme volatility as the military conflict has eroded confidence and contributed to a vast departure of capital.
Since hitting the all-time low, the hryvnia strengthened in the following days ending 4 March at 22.50 UAH per USD, which marked a 16.5% appreciation over the same day of the previous month. The strong rebound was largely on the back of optimism that the IMF will approve a new bailout package for the country this month and replenish the country’s foreign reserves. In addition, the strengthening of the hryvnia reflected the Central Bank’s decision to raise the discount rate from 19.5% to 30.0% on 3 March.