Ukraine's central bank has devalued the nation's currency by 25% against the dollar in a bid to shore up its war-torn economy

• Ukraine's central bank devalued the country's currency by 25% on Thursday.
• The bank cited the US dollar's strength and the impact of Russia's invasion on Ukraine's economy.

Ukraine's central bank said on Thursday it had slashed the value of its hryvnia currency by a quarter in response to the strength of the US dollar and the impact of Russia's invasion on Ukraine's economy.

Ukraine, which had essentially fixed its currency against the dollar since the start of the war at a rate of 29.25 hyrvnia, had seen its purchasing power and the value of its exports eroded by the strength of the greenback, which is near 20-year highs against a basket of major currencies.

The central bank said it had fixed the currency at a new rate of 36.57 hyrvnia, worth around 3 US cents, marking a 25% devaluation.

"The reasoning behind the decision was the shift in the fundamental parameters of the Ukrainian during the war and the strengthening of the dollar," the central bank said in a statement in English on its website.

"This step will improve competitiveness of Ukrainian producers, converge exchange rate conditions for different groups of businesses and households, and support the resilience of the economy during the war," it added.

Kyiv secured a deal with foreign creditors on Wednesday to suspend payment on its oversees bonds that will run from next month until at least 2023, in part to offer some relief for the country's ravaged finances, the FT reported.

The group of bilateral creditors, which includes Canada, France, Germany, Japan, the United Kingdom, and the USA, said in a statement on Wednesday:

"We, as official bilateral creditors of Ukraine, intend to provide a coordinated suspension of debt service due by Ukraine from August 1st, 2022 until end-2023, with the possibility of an additional year, on our claims and consistent with the national laws of the creditor countries."

A weaker currency makes a country's exports cheaper for foreign buyers. Ukraine has typically been a major exporter of sunflower oil, wheat, steel, coal and fertilizer, among other commodities, but both production and flows have been severely disrupted by Russia's war in the country that started in late February.

Against the euro, the Ukranian currency was last down 24% at 37.41 hyrvnia.