Ukraine’s central bank reserves increase 30% to USD 34.6 bln over 2010

Ukraine’s central bank (NBU) reserves went up 3.1% m-o-m in December and reached USD 34.6 bln or 30.5% above their end-2009 level. Mykyta Mykhaylychenko: The increase in December was driven by a USD 0.5 bln Eurobond placement by the government as well as receipt of a USD 1.5 mln tranche from the IMF (of which USD 1 bln went directly to the government). At the same time, the NBU spent net USD 613 mln (USD 383 mln in November) on the domestic forex market to keep the UAH from depreciation as the major part of the foreign exchange demand came from the cash market, where the deficit reached USD 1.9 bln (vs. USD 1.7 bln in November). The current level of reserves covers close to 80% of ST external debt (registered as of end-3Q10) and corresponds to 5.5-6.0 months of total imports. We do see that the NBU is willing and able to keep USD/UAH exchange rate stability during 2011, especially providing continuous IMF support (USD 6 bln in tranches are scheduled for 2011) although some managed UAH depreciation (within 5%) is possible to keep the BoP current account from widening.