Bloomberg News

Ukraine’s Hryvnia Drops Most in Two Years Amid Euro 2012 Tension

June 08, 2012

Ukraine’s hryvnia fell the most in two years against the dollar amid a deepening crisis in Europe and as foreign officials skip Eastern Europe’s biggest sporting event since the breakup of the Soviet Union.

The Ukrainian currency lost 0.8 percent to 8.0945 per dollar, the sharpest drop since September 2010. The benchmark Ukrainian Equities Index declined as much as 9.7 percent before closing up 3.9 percent at 860.8.

Global attention is focused on Ukraine as the former Soviet republic and Poland host the Euro 2012 soccer championship, the region’s biggest sports tournament since Sarajevo’s Olympics in 1984. U.K. ministers will not attend the opening stages of the championship, which starts today, because of human-rights concerns, the British foreign office said yesterday. French government ministers won’t be allowed to go to matches, Prime Minsiter Jean-Marc Ayrault said June 1.

“There’s a cloud of negativism spawning around,” Alexander Valchyshen, head of research at Kiev-based Investment Capital Ukraine, said by e-mail. “It started well back in 2011 when politics turned sour and the former prime minister got a jail sentence. Prospects of dismal economic performance have forced foreign investors out.”

Former Prime Minister Yulia Tymoshenko was found guilty in October of overstepping her authority as premier when signing a gas accord with Russia in 2009. She was sentenced to seven years’ imprisonment.

Devaluation ‘Inevitable’

The hryvnia may be devalued by as much as 10 percent after elections in October this year as part of negotiations with the International Monetary Fund, according to Vladimir Tsibanov, a Moscow-based economist for Societe Generale SA’s OAO Rosbank (ROSB) unit.

“Euro 2012 will be a temporary relief, but of course the sentiment for the Ukrainian economy is deteriorating very rapidly,” he said by e-mail. “Hryvnia devaluation is inevitable, from our point of view, as the IMF requires a more flexible exchange-rate regime.”

VAT Ukrnafta, a state-controlled oil producer, dropped 0.7 percent to 163.3 hryvnia, the lowest price since October 2009. Ukrainian stocks are the cheapest of any emerging market compared with their estimated earnings, according to data compiled by Bloomberg.

“There’s very little demand for Ukraine’s locally-listed stocks,” Roman Zakharov, a Kiev-based analyst at Troika Dialog, said by phone. “Amid the risk-off mode, general sentiment toward the country is still cautious. Ukraine is floating in a tiny boat amid big storm waves.”

To contact the reporters on this story: Jack Jordan in Moscow at jjordan22@bloomberg.net; Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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