November 3, 2014 / 12:52 PM / 5 years ago

UPDATE 1-Ukraine's central bank sells $1.3 bln defending hryvnia in 1.5 months

(Adds quote on hryvnia outlook, comments on gas payments, GDP)

KIEV, Nov 3 (Reuters) - Ukraine’s central bank chief said on Monday the bank had sold$1.3 billion defending the hryvnia in the past month and a half, and it will increase interventions to daily auctions to support the faltering currency.

The central bank has had to draw heavily on its foreign currency reserves to defend the hryvnia. The currency has lost around 40 percent of its value against the dollar since the start of 2014 because of political upheaval, ongoing tension with Russia and a separatist conflict in eastern Ukraine.

The central bank’s efforts have “stabilised” the situation on the currency market, bank head Valeriia Gontareva said at a briefing, adding that daily dollar auctions would be held from Wednesday, rather than weekly or biweekly.

With daily auctions “we believe that we’ll reach an equilibrium exchange rate very quickly”, Gontareva said, a state where demand for a currency matches its supply.

Gontareva did not say where reserves currently stand, but they are likely to have fallen from the $16.4 billion reported on Oct. Apart from its interventions, the bank has also had to help state energy firm Naftogaz pay holders of its $1.6 billion Eurobond.

The International Monetary Fund, from whom Ukraine is receiving a $17 billion loan package, has agreed that the central bank can pay for Russian gas directly from reserves, Gontareva added.

The central bank has revised its forecast for the Ukrainian economy in 2014. It now sees expects gross domestic product to shrink by 7 percent rather than 9 percent, she said.

The World Bank said in October the government would have to shelve hopes of economic growth until 2016, forecasting a contraction of 8 percent this year and 1 percent in 2015 because of the disruption to industrial activity in the conflict-hit east.

The hryvnia stands at 12.95 against the dollar.

Reporting by Natalia Zinets; Writing by Alessandra Prentice; Editing by Andrew Heavens, Larry King

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