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Ukraine mkts focused on poll aftermath, hryvnia flat

Published 01/26/2010, 11:54 AM
Updated 01/26/2010, 11:57 AM

* Hryvnia stable in election race, dealers wary of aftermath

* Market ignores latest exchanges amongst leaders

* Hryvnia weakness seen in long term

* TAKE A LOOK on Ukraine's election: [ID:nLDE60I25W]

By Natalya Zinets

KIEV, Jan 26 (Reuters) - Ukraine's hryvnia was unmoved by the latest round of exchanges in an increasingly fraught presidential election campaign and dealers said the market was wary of the political aftermath no matter who wins.

The hryvnia has broadly traded between 8.08-8.175/$ since the Jan. 17 first round of voting which pushed opposition leader Viktor Yanukovich and Prime Minister Yulia Tymoshenko into a second decisive round on Feb. 7.

On Tuesday the hryvnia traded at 8.08-8.09 to the dollar.

"The rates are the same as they were yesterday. I see no catalyst that could change that situation (in the next few days)," one dealer said.

Yanukovich and Tymoshenko have fought a frantic and at times dirty campaign. But analysts say their economic programmes differ little and more likely to impact the market would be any turmoil in the aftermath of the election.

Analysts say either losing side could challenge the election result if it is close, dragging the process into a potentially long court case, while both candidates could call for a snap parliamentary election in a bid to consolidate their power. Such delays could hurt the currency by prolonging the suspension of a $16.4 billion bailout from the IMF, which is likely to want to negotiate further funds with a stable government.

But for now, the hryvnia ignored exchanges from leaders.

For a TAKE A LOOK please click on [ID:nLDE60I25W]

Tymoshenko continued to press Sergey Tigipko, a businessman who came a strong third in the first round of voting, to accept her offer of the premiership should she win the final vote. Both her and Yanukovich have tried to woo his voters to their side.

Tigipko, a former central bank chief and economy minister, portrays himself as a technocrat capable of dragging Ukraine out of a deep economic crisis. He has hedged his bets and said he would serve under either as long as they backed painful reforms.

"One can say anything one wants. But we shall see how it will be in the end -- who will win and when all this will finish," another dealer said. "Right now there's no point in talking about reforms and how they may impact the hryvnia."

The hryvnia is trading at almost half its peak reached in 2008 at 4.5/$. Its value plummeted at the end of that year as a deep economic recession took hold and the central bank intervened on the market most days last year to prop it up.

Analysts say it is still pressured by a current account gap, a sharp fall in foreign investment and the suspension of a $16.4 billion bailout from the IMF on which both state finances and the central bank had been relying last year.

On the upside, the hryvnia is supported by the central bank which is issuing deposit certificates for banks, lapping up hryvnia liquidity.

"But it is an illusion to think that the central bank could continue this throughout the year," said independent economist Borys Kushniruk. "There are economic fundamentals for the hryvnia's weakening." (Writing by Sabina Zawadzki; editing by Patrick Graham)

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