(Adds Savchenko quotes, details, analyst, hryvnia rate)
By Natalya Zinets
KIEV, Sept 11 (Reuters) - Ukraine's Central Bank Deputy Oleksander Savchenko quit on Friday and criticised the institution's policies as leading to an unstable foreign currency market.
The resignation is unlikely to impact the central bank's fight against the weak hryvnia currency as Savchenko had been stripped of major responsibilities but is another blow to foreign sentiment on Ukraine, embroiled in political infighting.
Savchenko is one of three deputy chairmen of the bank, which has come under repeated fire from the government and Prime Minister Yulia Tymoshenko for its failure to support the hryvnia currency.
"I resign ... due to my disagreement with the currency, monetary and credit policies conducted by the central bank board which leads to the destabilisation of the hryvnia," Savchenko told journalists, confirming an earlier report.
Savchenko fell out with fellow members of the board over the management of the currency a few months ago and his responsibilities were changed to looking after cash market from currency controls and licensing.
"But when I came back from holidays -- and they took them (those responsibilities) away, that's when I resigned," Savchenko said.
The hryvnia lost over half of its value to the dollar in the last four months of 2008 as the global economic crisis took hold of Ukraine last September.
The currency weakened slightly on Friday and was quoted at 8.50-8.54 from about 8.4 on a day when the central bank did not carry out any dollar auctions.
Analysts and international financial institutions have said the currency's weakness has been underpinned by economic fundamentals -- plunging exports, higher foreign currency debt repayment and gas prices.
Uncertainty about future government and central bank policies, in the run-up and aftermath of a presidential election on Jan. 17 also play a part, analysts say.
WEAK ENVIRONMENT
"Maintaining broader market confidence is key when a central bank also needs to inject liquidity into a weak banking sector, otherwise capital flight just ensues," RBS analyst Tim Ash said.
"Unfortunately, the central bank has been trying to tackle these problems against a backdrop still of a weak overall political and policy environment as Ukraine heads to presidential elections in January."
Tymoshenko, expected to fight for the president's post in January, has insisted the hryvnia's weakness was down to central bank management. Millions of Ukrainians who took out debt in dollars have been affected by the currency's fall.
She called last year for the resignation of the Central Bank Chief Volodymyr Stelmakh and in January accused the central bank of supporting "speculative" hryvnia deals. [ID:nLI211373] [ID:nLM722621]
President Viktor Yushchenko, himself a former central banker, has also criticised the central bank and has on occasion warned that heads could roll at the institution. [ID:nL1500685]
The IMF, which has disbursed over $10 billion of a $16.4 billion loan programme signed last November, has said the independence of the central bank must be more assured.
After a period of stability, the hryvnia began falling again in the past two months, prompting an attack from the interior ministry, which said this week it had enough information to open a case against the bank's management of the currency.
The ministry said on Thursday it has summoned First Deputy Chairman Anatoly Shapovalov to answer questions about the central bank's role on the currency market. Interfax Ukraine reported on Friday the meeting will take place next week. (Reporting by Natalya Zinets; writing by Sabina Zawadzki)