No more euro in Kiev

In Kiev today one euro is worth 8 hriven, while the dollar is down to 4,9. This is pure theory, obviously, because there are no more euro in town. According to official declarations it will take a couple of days to convert enough (now) useless US$ to euro and restore liquidity. The rate is not expected to get any better for the US$, but nobody excludes that it could get even worse.

The two currencies have also started to diverge in their interest rate. For any deposit longer than 30 days the euro is now giving 1% less to savers (on yearly basis, 9,5% for the US$, 8,5% for euro). Yet the most serious competitor for the US$ at this point is the ukrainian hrivna itself. It has the same inflation rate as the US$, but it gives savers 15%year. The only thing that keeps people from a massive conversion to hriven is the traditional lack of trust in the national currency.

This lack of trust is not absurd, since the person who led the country to its first hyperinflation is now serving as President, and while the whole planet was getting ready to an obvious big problem with the US$ the ukrainians (as always) haven't received any professional support from their National Bank. It's also very unclear what will happen of the national banking system, since most banks have lended out money against a fixed estimate of value in US$ and credit here is usually insured in US$.

Possibly this is one of the reasons behind the ukrainian gold rush. With no more euros available and a currency/government that cannot be trusted, the ukrainians seem to be starting to consider gold as a safe way to keep their money, even for amounts in the order of thousands euro.

A further weird measure that has followed the support given to Jushchenko by big banks during the last elections is the unofficial 3% tax. All of us who have bank accounts in foreign currencies are now forced to change them in hriven, then buy back their currency in order to obtain the cash we have on our accounts. This amounts to ~3% in forced commissions, a sum that goes straight in the pockets of the big banks and cannot be countered by any competition, since it's fixed by law. Nice life, ain't it?