Ukraine hryvnia shrugs off Russia row, stocks shut

KIEV, Jan 5 (Reuters) - Ukraine's hryvnia was little traded on Monday with the market unaffected by a gas row with Russia which has led to a supply cut since Jan. 1, dealers said.

The hryvnia UAH= has fallen sharply in recent months, losing half of its value to the dollar at one point in December hitting a historic low of 10/$. It strengthened in the last two weeks of December to about 7.8/$.

The hryvnia was quoted at 7.95-8.2/$. There was no sign of central bank intervention. "The market is sluggish -- there is very little activity, and such a situation is normal for this time of the year. This will continue until mid-January," one dealer said.

"There are small individual transactions from which it would be difficult to predict a trend," the dealer said.

Ukraine's small PFTS stock exchange was closed on Monday and will start trading after the Orthodox Christmas on Jan. 7. It had been one of the fastest rising stock indices in the world in 2007 but then lost most of those gains through out last year. The nascent stock exchange lost almost three-quarters of its value in 2008, with its index tumbling quickly since September when investor sentiment turned on emerging markets and the global financial crisis took a hold of the region. A fall in global demand for steel drove industrial product down and slowed exports, which in turn weighed on the hryvnia. This, and a slowdown in virtually all sectors and falling consumer demand led to a sharp economic downturn.

President Viktor Yushchenko's top economic aide estimated the economy grew 1.8 percent last year, after initial forecasts of over 6 percent. He forecast a sharp recession this year. "In 2009, it is my view that it (the GDP change) will be minus 3.0 to minus 5.0 percent unfortunately," Oleksander Shlapak told Reuters in an interview on Sunday.

"There are not statistics yet (for 2008) but my feeling is we will get 1.8 percent growth, somewhere between 1.5 and 2.0 percent," he said.

Russia cut off gas to Ukraine after the two sides could not agree on a price for this year. Steep hikes in Russian gas prices since 2005 has widened the current account gap at an alarming speed, underpinning the hryvnia's weakness. Ukraine has said $235 per 1,000 cubic metres was the most it could pay for gas, compared to $179.5 last year, though Shlapak said a price of $250, should transit fees rise also, could be acceptable.

"For us the price $250 would be tough medicine but we would endure it," he said. "I am convinced the Ukrainian economy will withstand this price." (Reporting by Yuri Kulikov and Guy Faulconbridge; writing by Sabina Zawadzki; editing by Chris Pizzey)