Following yesterday's admission by the new head of Ukraine's central bank of the considerable bank runs in recent days and the rapid dwindling of central bank reserves, Sergiy Kruglik - the director of international affairs for the bank - announced this morning that Ukraine has adandoned the dollar peg and will adopt a flexible exchange rate. The Hyrvnia collapsed through 10.00 on the news and is now trading 10.40 at record lows against the USD.
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As The Economist notes, on February 7th the National Bank of Ukraine (NBU, the central bank) finally devalued the official rate of the hryvnya, to HRN8.7:US$1.
The policy was then to set the peg to the dollar roughly in line with trading on the interbank exchange. At the same time, the authorities introduced more foreign-exchange controls.
This has now changed and the currency is in free-fall. One cannot but think this is a desperate attempt to force the hands of a bailer-out to move before total chaos ensues (and of course, as the UAH plummets so import costs of energy will soar).
Charts: Bloomberg