National Bank of Ukraine

NBU Foreign Exchange Market Update
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7 March 2019

Press Release


After the slight weakening of the hryvnia seen in early 2019, the FX market trend has reversed, and, driven by market factors, the hryvnia has been strengthening in recent weeks. As of 7 March 2019, the exchange rate was UAH 26.48 per USD 1, up by 4.4% ytd. In particular, since the start of March alone, the hryvnia has strengthened by 1.4%. This was mainly due to the following factors:

·         favorable global prices for Ukrainian exports, in particular, agricultural and metals exports, and stable exports earnings

·         the approaching deadline for annual tax payments to the state budget, which encouraged businesses to sell foreign currency more actively

·         weak growth in imports of goods, and low volumes of repatriated foreign currency dividends

·         net sales of foreign currency by households.


Due to these factors, the supply of foreign currency currently exceeds demand on the interbank FX market. At the same time, the uptick in foreign purchases of government securities that started in mid-January has slowed, and now it is not a major contributor to the strengthening of the hryvnia.


The NBU remains committed to its Foreign Exchange Intervention Strategy for 2016-2020, and does not seek to maintain the exchange rate at a particular level. The NBU sells foreign currency to prevent undue fluctuations when situational factors put downward pressure on the hryvnia exchange rate. In contrast, when there is a surfeit of foreign currency, which puts upward pressure on the hryvnia, the central bank intervenes to purchase it in small amounts in order to replenish its international reserves.


Consequently, the current benign FX market conditions are enabling the NBU to replenish its international reserves without influencing the trajectory of the hryvnia exchange rate. More specifically, from the start of 2019 through 7 March 2019, the NBU purchased USD 700 million net, of which over USD 200 million was purchased in the first week of March.


The upward trend in the hryvnia exchange rate recorded in recent weeks is a healthy response from the market to the constant change in economic conditions. Driven by changes in the balance between supply and demand, the hryvnia exchange rate may either strengthen or weaken in different periods.


This makes it difficult to forecast the hryvnia exchange rate over the short-term. In order to hedge FX risks arising from the non-implementation of loan agreements and international contracts, businesses are now able to enter into forward agreements with banks, ensuring they will be able to buy or sell foreign currency at a specified exchange rate on a future date. This is foreseen under the central bank’s FX market liberalization program.



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