To foster transparent monetary policy in terms of FX interventions the National Bank of Ukraine (NBU) is initiating a quarterly purchase of foreign currency to replenish international reserves of Ukraine. For Q1 2018 the foreign currency target is set at USD 10 million a day.
Such a purchase will have no significant impact on the interbank market. At the same time, depending on market conditions, FX purchasing interventions may be less or not take place at all.
Furthermore, the purchased amount in one day can exceed the announced amount, however, such interventions will be conducted for other purposes set out in the Foreign Exchange Intervention Strategy of the National Bank of Ukraine for 2016-2020.
As before, the NBU during interventions will minimize its impact on the pricing on the FX market. First, the announced interventions for replenishing international reserves will not be sufficient in contrast to the amount of total operations on the interbank market. Second, priority will be granted to interventions, where the NBU is not the price-maker, rather accepts bids of other FX market traders. Such FX interventions, where the NBU plays the role of a price-taker, include FX Action and Request for Quotations.
This approach complies with the NBU’s strategy of FX interventions for 2016-2020.
Fixed quantitative indicators for daily interventions are an important element of the floating exchange rate regime. This regime does not require the NBU to maintain a specific exchange rate, and the NBU presence on the FX market is determined by accumulation of international reserves, streamlining the FX market operations and ongoing transmission of the key interest rate.