Kyiv tries to dampen currency fear as Fitch downgrades Ukraine

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Kyiv tries to dampen currency fear as Fitch downgrades Ukraine

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Ukraine’s central bank has imposed currency controls to try to prop up the hryvnia.

It has limited private transfers of dollars out of the country to around $5,700 a month.

There is also a ban on purchases of foreign currency for overseas investment or for early repayment of loans.

“There have been strains on the currency market recently, but we are sure this is only a short-term trend,” the governor of the National Bank of Ukraine, Ihor Sorkin, told a news conference.

“The National Bank will strengthen monitoring control on the market to try to reduce speculative demand …. When the situation improves, these temporary measures will be removed.”

Analysts warned the moves would promote a flourishing black market in dollars.

Ukraine’s debt crisis has left it on the verge of bankruptcy amid anti-government protests against closer ties with Russia.

Russia suspended a $15 billion bailout last week after President Viktor Yanukovich, in a concession to protesters, sacked the pro-Russian prime minister.

Moscow says it will only restart the funding once it knows who is to be the new prime minister.

After the controls were brought in Fitch downgraded Kyiv’s credit rating from B minus to CCC due to political instability and fears over its debt repayment schedule.

The hryvnia fell below 9.0 per dollar on Wednesday for the first time in five years. and Fitch said: “There is a risk of a steep and uncontrolled depreciation, given the fragile confidence in the hryvnia.”