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Ukraine currency hits a record low versus dollar: central bank

KIEV, Ukraine -- Ukraine's national currency fell Tuesday to a record low against the dollar, the central bank said, as fierce fighting in the east hammers the economy.

The National Bank of Ukraine said that the average exchange rate it calculates based on interbank transactions had dropped to 13.14 hryvnia to the dollar.

On Monday the central bank said it did not plan to drop its floating exchange rate policy even though it has intervened three times in recent days to stem the currency's fall.

But after scrapping a dollar peg in February, it did warn that “if there was a substantial increase in foreign exchange market turbulence, the National Bank would be forced to impose administrative restrictions, along with market-based measures.”

The bank blamed fighting between government forces and pro-Russian rebels for pushing the hryvnia lower but said it was only a “temporary trend.”

The bank also noted an improved balance of payments and emphasized that there were “no macroeconomic grounds” for the sharp fluctuations.

Economists agreed that there were no fundamental reasons for the currency's slump, pointing rather to a short-term impact from the fighting and fears of a possible Russian invasion.

“This was caused by the population reacting to the negative stream of news and looking to save money in foreign currencies,” Olena Bilan, chief economist at investment firm Dragon Capital, told AFP.

Bilan said the central bank should resume market interventions to shore up the currency.

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