Ukraine truce appears to take hold, currency trading banned

Pro-Russian rebels pulled artillery from the front, but the news did nothing to halt a currency collapse.

An elderly man walks past a tank of Ukrainian forces in the eastern Ukrainian village of Luganske, near Debaltseve. Picture: AFP.

KIEV/MAKIYVKA - A long-awaited truce appeared to be taking hold at last in east Ukraine on Wednesday as pro-Russian rebels pulled artillery from the front, but the news did nothing to halt a currency collapse that forced the central bank to ban most trading.

The Ukrainian military said it was still too early for it to begin withdrawing its own heavy guns. But its acknowledgement that most of the front was quiet suggests it too could push ahead with implementing a truce that had appeared stillborn when the rebels ignored it to launch a major advance last week.

The cautious good news from the front has come amid dire economic consequences for a country teetering on bankruptcy.

With the hryvnia currency in free fall this week as investors pull out cash, the central bank tried to call a halt on Wednesday by banning banks from buying foreign currency on behalf of their clients for the rest of this week.

Although banks could still trade with each other, by mid-morning there were no registered trades at any rate, leaving the currency in limbo. The previous day, the central bank rate based on reported trades had fallen 11 percent against the dollar.

Exchange kiosks on the streets in Kiev were selling limited amounts of dollars for 39 hryvnias, around 20 percent worse than the rates advertised in the windows of commercial banks where dollars were not available.

A construction worker exchanging dollars at a kiosk in a grocery shop in return for a bag filled with thousands of hryvnia, laughed and told shoppers, "Soon we will have to walk around with suitcases for cash, like in the 1990s."

The currency has lost more than half its value so far this year, after halving during 2014. The currency's collapse and the prospect of more controls have also sent Ukrainian bonds tumbling.