THE confrontation between opposition-led protesters and the government of President Viktor Yanukovich, and a refusal to agree a compromise, is weighing on the Ukrainian economy, acting prime minister Serhiy Arbuzov has warned.

He told a meeting of the interim cabinet: "Political instability is putting pressure on the currency market. There is tension despite a lack of economic reasons for this.

Every day of confrontation and a lack of desire to find a compromise weakens our country economically."

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Mr Arbuzov was appointed after the resignation of Prime Minister Mykola Azarov last week as Mr Yanukovich tried to appease protesters.

Weeks of stand-off with the opposition show no sign of easing but Mr Arbuzov said: "There are no fundamental economic reasons for concern."

He noted the balance of payments for 2013, published on Tuesday, showed a surplus of £1.3 billion compared to a 2012 deficit of £2.6bn.

However, the overall current account deficit grew last year by 13% to £9.9bn.

Ukraine's central bank intervened in the currency market for a second day yesterday, offering to sell dollars at auction for 8.7000 hryvnias against 8.6000 hryvnias on Tuesday.

The hryvnia was quoted on the commercial market at 8.75-8.80 per dollar, little changed on Tuesday's close of 8.75.

Bank bosses have been trying to stem strong demand for dollars prompted by the unrest, which has seen demonstrators take over the centre of Kiev and public buildings in other cities since November.

The protests were prompted by Mr Yanukovich's rejection of a trade deal with the EU and his decision to accept the financial aid from Russia instead.

The hryvnia currency has lost more than 6% so far this year.