UPDATE 2-Ukraine c.bank reiterates hryvnia stability pledge

Published 09/23/2010, 07:52 AM
Updated 09/23/2010, 07:56 AM

* Sold $602 million so far in September

* Forex reserves remain high

* Says hryvnia will not weaken beyond 8.0/$ in 2010

* Rules out interest rate changes (Adds details, background)

By Yuri Kulikov

KIEV, Sept 23 (Reuters) - Ukraine's central bank said on Thursday it would not allow the hryvnia to drop significantly against the dollar, repeating its forecast of 8.0 hryvnias per dollar as a limit for depreciation this year.

The former Soviet nation's central bank has intervened heavily this month to ease pressure on the hryvnia that analysts have explained by seasonal factors, speculative buying by individuals and policy shift concerns.

Valery Lytvytsky, a senior adviser to the central bank chairman, said the bank's net sales of dollars -- carried out to support the national currency -- total $602 million so far this month.

This had brought its forex reserves down to $32.360 billion on September 22 from $32.692 billion at the end of August. In previous months, the central bank had been buying dollars and its total net purchases stand at $2.9 billion so far this year.

The country received its first, $1.9 billion slice from an International Monetary Fund loan programme in August.

"The chairman's outlook rules out any stress fluctuations of the exchange rate," Lytvytsky told reporters, adding that chairman Volodymyr Stelmakh's earlier outlook on the hryvnia remained unchanged.

Stelmakh said earlier this month the hryvnia would not weaken beyond 8.0 per dollar this year. The currency traded at 7.933 per dollar on Thursday.

Lytvytsky said that fundamentals were supporting a stable hryvnia with Ukraine's current and financial accounts "close to equilibrium".

He said the bank was also unlikely to change its key discount rate in the near future. The bank cut the rate to 7.75 percent through several adjustments this year when Ukraine registered monthly price falls for several months in a row.

But consumer prices started to rise in August when the government raised gas prices for households and heating companies by 50 percent as part of an austerity package agreed under the IMF deal. (Writing by Olzhas Auyezov; Editing by Richard Balmforth/Ruth Pitchford)

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