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Tuesday, March 10, 2009

 

further destabilization in ukraine


zero hedge cites bloomberg in tracking the stil-nascent debacle in eastern europe.

Ukraine's hryvnia currency plunged today despite the central bank's warning to 17 lenders not to buy or sell the hryvnia for less than its set exchange rate. As the hryvnia has slumped 42% against the dollar in the past 6 months, the central bank has been forced to spend more and more of its forex reserves to keep propping the currency. The Ukraine, which unlike the U.S. cannot inflate its way out of a $12.3 billion current account deficit, has received a promise from the IMF for a $16.4 billion bailout loan on the condition that it stops purchasing its currency and essentially lets it fare on its own. The results of that policy became apparent immediately as the hryvnia which had been trading just inside of the 7.98 per dollar exchange rate for the past week, tumbled to 8.235 today. ...

Ukraine, which was recently downgraded to Europe's lowest CCC+ rating, which itself is a lagging indicator has seen industrial production plummet 34.1% in January while its inflation rate of 20.9% the highest in Europe. ZH still believes the biggest threat to the global economy is the domino default effect which will likely start in the Ukraine or one of its neighboring countries.

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