The threat of a devaluation of Ukraine’s currency hangs over the country after its central bank found itself temporarily unable earlier this month to defend the hryvnia’s peg to the U.S. dollar.

“The risk of a postelection devaluation remains high in our view, though a currency adjustment doesn’t seem inevitable as yet,” said Olena Bilan, chief economist at Dragon Capital, a leading investment bank in Ukraine.

Last week’s bump in the hryvnia-dollar rate reignited fears of rapid devaluation, sparking even faster reassurances by Ukrainian government officials that everything was under control. Experts agree some level of devaluation will occur before or after the Oct. 28 parliamentary election, but also point to ways in which citizens and businesses can safeguard their assets or even turn a profit amidst the turmoil.

Warsaw-listed sunflower oil producer and grain trader Kernel, for instance, has around 90 percent of revenue in foreign currency making it "the most defensive name among Ukrainian (foreign) listed companies," said Tatjana Telezko, agribusiness analyst at Kyiv-based investment bank Dragon Capital.

Consumer inflation dynamics in August was caused by reduction of food prices, which occupy 54% of the consumer basket, Olena Bilan, Dragon Capital chief economist said.

This year’s macroeconomic indicators might be reduced. The government forecast GDP’s growth at 7.9 percent. But Dragon Capital investment bank recently slashed its GDP forecast to just 1 percent.

“Our base case view also assumes that NBU reserves will decline to $25 billion [covering 3 months of imports] by end-2012 on foreign currency market intervention and repayments to the IMF, and drop further to $23 billion (2.6 months) in 2013,” Olena Bilan, Chief Economist, Kyiv-based investment bank Dragon Capital wrote in a note to investors.

The upcoming parliamentary elections make our government forget the crisis lessons. In April the Rada passed amendments to the national budget with regard to the president’s initiatives. Consequences of such step were notable right away. «By all appearances, rates of spending spree speeded in May after amendments to the national budget 2012 were passed and increased expenditure by UAH 33 bn (2.3% GDP). We believe such step will add approximately UAH 2 to the current rate of expenses in May and UAH 5.5 bn monthly in June – September,» forecasts chief economist at Dragon Capital.

Interventions to stabilize the hyrvnia doubled in comparison to June, a research note by investment bank Dragon Capital noted, straining the reserves which stood at the $38.2 billion in Aug. 2011. The National Bank of Ukraine’s decision to tighten reserve requirements for banks has also been viewed by experts as part of the government strategy to keep the exchange rate stable, notably by creating hyrvnia shortages on the local market.