Mr Valerii Lytvytskyi, Advisor to the Governor of the National Bank of Ukraine, has said that a number of objective factors, in particular, an easing of social and political tensions in the country, approval of the IMF program and the possibility to get access to financial resources offered by international creditors would help reduce pressure on the exchange rate.
The National Bank of Ukraine closely follows foreign exchange market developments and uses the monetary policy instruments it has at its disposal to revive economic activity in Ukraine.
“We feel confident that the structural economic reforms will prove to be a success and believe that the equilibrium reached in the foreign exchange market is not ultimate. It only reflects the current complex economic and political realities, but eventually, a new balance will be struck between demand and supply leading to the appreciation of the hryvnia,” he said expressing confidence that a visit by the Ukrainian delegation to Washington will prove successful.
Mr Valerii Lytvytskyi assured that once a new Stand-by Arrangement (SBA) was approved, Ukraine would see a greater inflow of direct and portfolio investment; it would be easier for the country to borrow funds, and EBRD-supported programs to replenish foreign exchange supply would be run in Ukraine.
The situation in the foreign exchange market reflects expectations. “The exchange rate cannot but react to the challenges such as political instability, a return to recession, upward price pressure, the run on banks. That is why the Governor of the National Bank has repeatedly emphasized that it is the real exchange rate which is determined by market forces acting in the market. As the economy gets stronger and economic activity recovers, we will see a respective change in the exchange rate,” said Advisor to the Governor of the National Bank of Ukraine.
However, the interaction of demand and supply in the foreign exchange market is under the influence of not only political, but also psychological and emotional factors. “We count on the rationally minded population who will be guided by pragmatics rather than emotions, being aware that those who strive to purchase foreign exchange at any price might suffer heavy losses,” said Advisor to the Governor of the National Bank of Ukraine. The trend towards buying up foreign exchange can be reversed," said Mr Valerii Lytvytskyi.
Sooner or later Ukraine will see an ease in political tensions and the National Bank of Ukraine's task will be to use this opportunity to resume public confidence in the national currency. Thus, an expert calls on the public not to follow the example of currency speculators who have the expertise in these transactions, keep calm and not to use foreign exchange as a hedging instrument.