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BNPWarns "TheRunOnUkrainianDepositsMayHaveAlreadyStarted"
"It is absolutely impossibletoforecast" Ukraine’sexchangerate, BNP Paribas notes in an ominous report today. Considering Ukraine’s huge need to cover its current account deficit, the country is increasingly reliant on financial inflows – and these will be difficult to secure. The Hyrvnia has collapsed this morninng to 9.00 back near December 2008 lows as BNP warns "TheNBU faces a difficulttask: letthe FX ratedevalueto a ‘new fairlevel’ withouttriggering a runonhryvniaretaildeposits, whichmighthavealreadystarted." Relying on external support amid a forced devaluation "increases risks of disorderly adjustement," and that appears to happening.
Ukraine’s currency – the Hyrvnia has collapsed to 9.00 this morning…
BNP’s warnings today (via Bloomberg):
“Itisabsolutelyimpossibletoforecast” hryvnia’sexchangerate, BNP Paribas analysts Serhiy Yahnych and Yevgeniy Orudzhev in Kiev write in report today.
Ukraine’s current-account gap, unstable funding and anti-govt protests have “created a dangerous Molotov cocktail, which now seems to turn into a currency crisis:” BNP
“The National Bank of Ukraine conducted only a minor intervention yesterday, which led to increased demand for dollars this morning:” BNP
“The NBU faces a difficult task: let the FX rate devalue to a ‘new fair level’ without triggering a run on hryvnia retail deposits, which might have already started. Furthermore, it is forced to conduct devaluation having no external support package, which increases risks of disorderly adjustement:” BNP
BNP comments seem extremely accurate from last year…
… rebalancing of the current account has been virtually zero over the last few months.
Considering Ukraine’s huge need to cover its current account deficit, the country is increasingly reliant on financial inflows. These will be difficult to secure,
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We expect FX reserves to nosedive to USD 18bn by the end of 2013, underlining the case for a weaker local currency. Ukraine badly needs to rebalance its current account, with calls for a more flexible (and weaker) FX rate getting louder.
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