* C.bank offers to sell dollars at 7.937/$, buy at 7.9190
* Currency holding near multi-month lows
* Population looking to buy dollars
* Cbank allowing greater flexibility, as pledged to IMF
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KIEV, Sept 22 (Reuters) - The Ukrainian central bank on Wednesday stepped into the market for a second day in a bid to keep a lid on hryvnia depreciation while gradually adjusting the market to increased volatility in line with IMF demands.
The central bank offered to sell dollars at 7.9367 hryvnias
The hryvnia traded at 7.9375 per dollar on Wednesday after matching on Tuesday a multi-month low set earlier this month of 7.94 when a central bank reshuffle sparked concerns about possible policy change. [ID:nLDE68519F]
This was exacerbated by demand for dollars from state energy firm Naftogaz to meet regular payments for Russian gas, which are made within the first week of each month.
"Currency fluctuations in an economy as big as Ukraine are normal. Unfortunately, the central bank had kept the exchange rate virtually unchanged between April and the start of September and now any moves of 1-2 kopecks are seen by the population and by the market as something extraordinary," said Anastasiya Golovach, analyst at Renaissance Capital.
"While the Naftogaz (dollar) purchases last for just a couple days at the beginning of each month, the panic of the population, if it starts, may get out of control as it happened, for example, last year."
The central bank intervened on an almost daily basis throughout 2009 to stem the hryvnia's fall against the dollar after the national currency plunged over 60 percent at the end of 2008 due to a dramatic fall in export revenues.
Now, the hryvnia is on track for its biggest monthly fall
versus the dollar in a year, but the size of the move is just
0.7 percent -- less than normal daily fluctuations on major
currency pairs such as euro/dollar
In allowing the hryvnia to fluctuate -- albeit with some constraints -- Ukraine is following its pledge to the International Monetary Fund, from whom it secured a $15 billion deal in July.
"The central bank is ready to control the interval of the fluctuations. I do not think it will allow the hryvnia to strengthen beyond 7.5 per dollar or weaken further than 8 (per dollar)," said Golovach.
"The central bank is showing it is ready to support the hryvnia within a certain interval, but it is now apparent that the hryvnia will be more volatile in the future."
The central bank has since said it saw the hryvnia staying roughly stable until the end of this year and the exchange rate would not fall below 8.0 hryvnias per dollar. (Writing by Toni Vorobyova and Richard Balmforth; Editing by Ron Askew)