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Ukraine's hryvnia slipped to new four-year lows on Friday while depreciation bets on the currency intensified on expectation that the near-bankrupt country will hurtle into crisis without a speedy aid infusion.
Across other emerging markets, currencies came under pressure against the dollar ahead of next week's meeting of the U.S. Federal Reserve which some expect will signal the start of the stimulus wind-down.
Focus remains on Ukraine however. With Kiev due to hold talks with Russia next week, anti-government protesters were preparing for a fresh weekend rally. The European Union, meanwhile, is holding out the promise of aid provided Ukraine signs a trade pact that it ditched last month.
But the political turmoil has put the economy into deep-freeze, and raised questions about how the country will defend its currency peg to the dollar and repay debts.
The EU aid hopes drove a brief 1-2 point bounce in Ukraine's Eurobonds in the past two sessions although the gains stalled on Friday .
The hryvnia traded at 8.31 per dollar in the spot market, the lowest since mid-October 2009. And non-deliverable forwards are implying a 10.25 per dollar exchange rate in a year's time, roughly a loss of 19 percent from current levels.
On Friday the one-year dollar/hryvnia forward traded 1 percent up on the day.
"In the past 24 hours, the announcement by (President Viktor) Azarov that they want an EU deal brought bit of rebound on the Eurobond curve. But while that's positive in the medium term, in terms of trade and investment I am not sure how much relief it will give in terms of debt repayment pressures," said Luis Costa, head of CEEMEA FX and debt strategy at Citi.
"We are talking of a country with over $7 billion in debt repayments in 2014."
A trader in Kiev said there were no dollars in the market at all, neither from exporters nor from the central bank. "If the central bank or (state-run) Oschad Bank don't come out and sell dollars, the hryvnia is going to keep falling," he added.
Ukrainian credit default swaps were untraded on Friday but Markit data shows one-year CDS closed on Thursday at over 1600 basis points, the highest since early-2010, which was shortly after the default by state-run oil firm Naftogaz.
Analysts also believe that EU aid will likely be linked in some way to a deal with the International Monetary Fund, which has made currency flexibility a pre-condition for aid. Costa said