According to investment company ICU, last week the National Bank of Ukraine (NBU) allowed the official dollar exchange rate to cross the 45 UAH mark for the first time, and on Wednesday set the official rate at 45.08 UAH per dollar.
Official exchange rate and last week’s movements
On Monday and Tuesday the NBU allowed the rate to cross 45 UAH per dollar, and on Wednesday the official rate reached 45.08 UAH per dollar. Overall, since the start of the year the hryvnia has weakened against the dollar by 5.9%.
According to ICU’s review, the hryvnia strengthened slightly at the end of the week after a short-lived breach of 45 UAH. The review emphasises the wave-like daily fluctuations of the rate.
Intervention volumes and the currency deficit
The overall currency deficit changed little last week, while the volume of the National Bank of Ukraine’s foreign-currency interventions remained at the previous level and exceeded $1.2 billion. Interventions are operations by the NBU in the market to support the exchange rate.
The review quotes the view: “The NBU is not rushing to weaken the hryvnia, currently allowing the value of the US dollar to cross the 45 UAH level only occasionally, but at this stage immediately bringing the US dollar’s value back below that level,” ICU analysts note.
Exchange-rate outlook and what to watch
ICU analysts expect the NBU to continue broadening exchange-rate fluctuations, gradually moving toward 45.8 UAH per dollar by the end of this year. The review also notes that “the structural deficit will remain large due to significant spending on domestically produced armaments” — one reason for maintaining high intervention volumes.
In the coming days it is worth watching the NBU’s official rate (45.08 UAH as of Wednesday), the volume of interventions, indicators of the currency deficit, as well as rates on the interbank and cash markets. The interbank market is where banks buy and sell currency among themselves.
