Ukraine’s hryvnia may weaken 6 percent by the end of the year against the dollar as falling metal prices widen the country’s current-account deficit, Renaissance Capital said.
RenCap raised its forecast for the shortfall this year to $8.5 billion from $5 billion to allow for a “global decline in metals prices,” Anastasia Golovach, a Kiev-based analyst with the investment bank, wrote in an e-mailed note today. The hryvnia may fall to 8.5 per dollar from 7.9960 today, she said.
A drop in demand for metals, Ukraine’s biggest export, pushed the economy into a 15 percent contraction in 2009 after the collapse of Lehman Brothers Holdings Inc. curbed demand for commodities. The central bank’s reserves fell to $34.95 billion in September from $38.2 billion a month earlier and may slide a further $7 billion by year-end as it sells foreign currency to stem the Hryvnia’s retreat, Golovach said.
“Any sharp devaluation could trigger an aggressive increase in demand for foreign currency, resulting in deposit withdrawls from banks,” she said.
The cabinet will avoid a “serious devaluation” by raising natural-gas tariffs for households to unlock a $15.6 billion loan from the International Monetary Fund, according to Golovach. The central bank will support the currency at 8.5 per dollar “at least until the parliamentary elections” in October next year, she said.