Heightened exchange rate volatility has been observed in the FX market since the start of the year, reflecting limited FX supply.
During the post-holiday period, foreign exchange proceeds that had accumulated during the holiday period in Ukraine that coincided in time with business days in the U.S. and Europe kept flowing to the interbank FX market. However, this was a temporary factor. Currently, FX supply is lower than in previous months due to a seasonal decline in economic activity that is typically observed at the beginning of the year and is manifested by lower FX proceeds from agricultural exports, which were the main source of foreign currency in the fall of 2016. In the meantime, metallurgy exports are gradually becoming the major source of FX proceeds. This trend is underpinned by a favorable external price environment thanks to higher global steel and iron ore prices.
Under such circumstances, the NBU is ready to intervene in the market to smooth out excessive exchange rate volatility caused by temporary factors and has enough instruments to address volatility. Ukraine’s international reserves currently amount to USD 15.5 billion as of the beginning of January 2017. This amount is sufficient for conducting foreign exchange sale interventions and enabling the NBU and the Government to settle their foreign debt obligations.
Since the beginning of 2017, the NBU sold a total of USD 14.6 million to prevent excessive volatility exchange rate volatility.
On 13 January 2016, the National Bank of Ukraine also announced a FX sale auction. The auction amount: up to USD 100 million.