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Thursday, April 24, 2008

Ukraine Central Bank May Widen Hryvnia Band

Ukraine's central bank council may widen today the corridor in which the hryvnia trades in an attempt to curb inflation, Petro Poroshenko, who is head of the council announced today.

The Natsionalnyi Bank Ukrayyny council is discussing a widening of the trading band to 4.90-5.30 against the dollar, compared with 4.95-5.25 now, Poroshenko stated at an investment conference in Kiev.

``We may widen the band, but we are not going to strengthen the hryvnia,'' said Poroshenko. ``There is no trend to the hryvnia's strengthening.''

The Kiev, Ukraine-based central bank controls the hryvnia rate by selling and buying dollars unlike other European banks that use interest rates to tackle inflation. It strengthened the hryvnia to 5.05 against the dollar in April 2005 from as low as 5.6 in November 2004. The bank has kept the official rate at 5.05 to the dollar ever since.

Ukraine's inflation rate jumped to an eight-year high of 26.2 percent in March as global food costs soared and domestic demand rose after the government increased social spending. The central bank is also trying to fight inflation by demanding commercial banks cut household loans and increase reserves. The bank will sell more than three billion hryvnias ($600 million) through an auction to refinance lenders, Poroshenko said.

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