NBU continues to be active on the interbank foreign exchange market to smooth out excessive fluctuations in the hryvnia exchange rate, which increased this week with the FX demand exceeding its supply.
The FX supply by the main export industries (mining and metals enterprises, agroindustrial sector) remains at a rather high level, indicating that there are no fundamental reasons for hryvnia to depreciate. Instead, there is an increase in FX demand in the interbank FX market due to seasonal, contextual, and psychological factors.
It is felt through seasonal increase in demand is observed from energy resources importers in need of foreign currency to pay for gas and oil products for the early start of harvest, and from importers of consumer goods and services (electronics, food products, tourism, etc.) as the result of personal income growth. In addition, due to negative expectations, traditionally before the Fall, the supply of foreign currency by the population on the cash market is decreasing, which affects the direction of banks’ operations in the interbank FX market.
To eliminate the imbalance in the interbank FX market generated by the above-mentioned factors, this week the NBU performed daily interventions selling foreign currency. In total, during the current week, the NBU sold USD 215 million through foreign exchange interventions. In particular, today an auction was conducted for the sale of USD 50.0 million, during which the applications for the purchase of USD 32.7 million were received. As a result of the auction, the NBU sold USD 24.8 million on the weighted average rate 27.93 UAH / USD. Thanks to the auction, the demand for foreign currency was satisfied, and the reference hryvnia exchange rate as of 12:00 noon amounted to 27.93 UAH / USD.
The NBU continues to closely monitor the development of the situation on the FX market and is ready to carry out FX interventions if necessary in order to avoid a sharp exchange rate fluctuations. At the same time, we would like to emphasize that, under flexible exchange rate regime, the NBU smooths out only those significant exchange rate fluctuations that occur as a result of contextual factors. If economic factors exert pressures that cause the exchange rate either to strengthen or to weaken, the exchange rate has to move in this direction, and the NBU will not oppose this move. The NBU’s task is not to maintain the hryvnia exchange rate at a certain level, but to reduce fluctuations of the hryvnia exchange rate and, thus, to prevent the deterioration of expectations and risks emergence, in order to reduce inflation to the target level.