Saturday, October 18, 2014

Ukraine Grannies Outprice Banks on Hryvnia Black Market - Bloomberg

Outside Kids’ World, a Soviet-built department store offering everything from Legos to leggings, a phalanx of “babusi,” the Ukrainian word for grandmothers, met Kiev shoppers’ foreign-exchange needs.

As other grey-haired blackmarketeers called out, “Taking dollars” and “Buying euros here,” to passers-by on the busy sidewalk, 56-year-old Irina flipped 1,400 Ukrainian hryvnia from a wad of banknotes, handed them to a customer and pocketed a $100 bill in return. Though she just commited an illegal act, Irina showed no fear of arrest.

“Why should I worry? I’m not cheating them, they aren’t cheating me,” said Irina, who didn’t give her last name. Her legitimate business, a card-table of windup cars, knock-off frisbees and balloons, was all but ignored. “Nobody buys these things. How else can I get money? What else can I do?”

The campaign by the Ukrainian government and central bank to halt the national currency’s 60 percent slump before Oct. 26 elections has inadvertently created a cottage industry of illicit currency trading that the International Monetary Fund says it is watching closely. While authorities pressure banks and companies to hold the hryvnia at 12.95 to the dollar to slow the economy’s freefall amid the deadly conflict with separatists in the east, they’re powerless to stop street trades that offer premiums of as much as 2 hryvnia above the official rate.

No Belief

The hryvnia closed unchanged from yesterday at 12.9 per dollar in Kiev, data compiled by Bloomberg shows.

“Simply put, the guy on the street doesn’t believe the cease-fire will hold, that the central bank has enough cash, or that the West will stump up more cash to ride to the rescue,” Timothy Ash, a Standard Bank (STAN) Group Ltd. (BABA) economist in London, said by e-mail Oct. 9. “They are voting with their feet by pulling cash from banks and buying” on the street.

Complete story at - Ukraine Grannies Outprice Banks on Hryvnia Black Market - Bloomberg

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