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Ukraine’s Hryvnia May Fall 10% by Year-End, Fitch’s Seville Says

Ukraine’s hryvnia may depreciate 10 percent by year-end because of “fairly weak” confidence in the currency, according to Charles Seville, director of Fitch Ratings’s sovereign group.

While officials including Prime Minister Mykola Azarov say the hryvnia will remain stable, moving to a more flexible exchange-rate regime would benefit the former Soviet republic in the medium term, Seville said today.

“There is pressure on the currency,” he told a conference in London. While derivatives investors are predicting a devaluation, “it’s not going to be on the scale of 2008.”

The hryvnia, which has declined 1.2 percent against the dollar this year, plunged almost 35 percent in the fourth quarter of 2008 after Lehman Brothers Holdings Inc. collapsed. Ukraine’s gold and foreign-currency reserves fell 2.5 percent last month as the Natsionalnyi Bank Ukrainy sold $1.8 billion to support the hryvnia.

Fitch is “watching how Ukraine will meet financing needs in 2013” and sees the government refinancing its loans to the International Monetary Fund, Seville said.

The Washington-based lender granted Ukraine a bailout in July 2010 before freezing it the following March after the government rejected demands to raise household heating tariffs. Ukraine spends as much as 2 percent of gross domestic product on natural-gas subsidies for state-run energy company NAK Naftogaz Ukrainy, according to Seville.

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