The dollar could hit a new record this week, and some exchange offices are already widening the gap between buy and sell rates, assesses banker Taras Liesovyi of Globus Bank.
Why exchange offices are widening spreads
According to Liesovyi, large-scale missile and drone attacks are hitting the economy: businesses find it harder to operate, and people live under stress, so some citizens buy dollars and euros to protect their savings. When demand rises in a frenzied way, individual exchange booths raise their selling rates and substantially increase the spread between buy and sell rates.
In adverse circumstances this gap can reach 1−1,5 hryvnia. Liesovyi also notes that fear is not always a good financial adviser, and a sharp surge in demand increases the costs for those who buy currency in panic.
Pressure on the hryvnia and actions of the National Bank of Ukraine (NBU)
There are no grounds to claim a systemic shortage of foreign currency, and the National Bank of Ukraine (NBU) will continue to level the balance between demand and supply on the interbank market through foreign-exchange interventions.
The interbank market is where banks buy and sell currency among themselves; foreign-exchange interventions are operations by the NBU to buy or sell currency to influence the exchange rate.
The factors putting pressure on the hryvnia, according to Liesovyi, are large import demand, a shortage of export receipts, the gradual rising cost of certain goods and fuel, and the budget’s reliance on international financial assistance.
Gold price in Ukraine
In early November the price of gold in Ukraine fell compared with most of October due to a roughly 3,7% drop in global quotes. At the NBU’s rate a gram of fine gold cost from 5 848,29 hryvnia (the month’s minimum, recorded on 26 October) to 6 066,59 hryvnia (the peak on 14 October).
The official accounting price of gold at the start of November was 183 039,35 hryvnia per ounce, which is approximately 5 929,87 hryvnia per gram. Last week the world price of gold jumped to over 4 120 dollars per ounce due to a weaker US dollar, lower US bond yields and cheaper oil.
Exchange rate forecasts for next week
Liesovyi expects the dollar to trade in a range of 45−45,7 hryvnia during the week, and the euro at 50−52 hryvnia. He notes that the corridors on both the interbank and the cash market will be the same.
The NBU is monitoring the market to avoid sharp rate jumps. Liesovyi also warns that the difference between the interbank rate and the rate at an exchange office can “eat up” more than the entire weekly move for those who buy currency in panic.
Market participants should watch the NBU’s official rate, interbank rates (the market where banks trade currency), cash exchange rates, the volumes of currency interventions and the world price of gold in the coming days.
