National Bank of Ukraine cuts forex interventions by 17.9% over past week as hryvnia’s weakening slows
MOSCOW. Oct 21 (Interfax) – The National Bank of Ukraine (NBU) reduced dollar sales on the interbank market by $131.6 million, or 17.9% to $602.7 million in the past week, as the weakening of the hryvnia’s exchange rate slowed to 12.8 kopecks from 37.4 kopecks the week before, Ukrainian media reported, citing data on the regulator’s website.
In the first four days of last week, the average daily negative balance of currency purchases and sales by legal entities increased to $74.2 million from $36.6 million for the same period the week before, amounting to just $297 million.
At the same time, the cash market saw a drop in forex purchases by the population, as a result of which the deficit stood at $21.3 million from Saturday to Thursday versus $29.6 million the week before last. Purchases of non-cash forex were larger that its sales for all of these days.
The official hryvnia-dollar exchange rate, which began last week at UAH 41.6027/$1, weakened to UAH 41.7607/$1 in the space of three days, but ended the week at the level.
On the cash market, the dollar exchange rate followed the trajectory of the official exchange rate of UAH 41.7565/$1 over the past week, while the hryvnia weakened by around 25 kopecks in total: the buy rate was around UAH 41.70/$1, and sell around UAH 41.80/$1.
On the first day of trading this week, the hryvnia weakened a bit further to UAH 41.7624/$1.
“As previously, Ukraine’s forex market is under the influence of the NBU’s controlled flexibility strategy […] The hryvnia’s exchange rate against the dollar has been weakening gradually since the beginning of October. The exchange rate on the cash market has been changing in a similar way,” experts from KYT Group, a major cash currency exchange market participant, said.
An increase in demand has been observed on the interbank market in October, prompting the NBU to boost its interventions, the experts said. They believe that, on one hand, this trend is seasonal, as companies’ forex needs to make payments usually grow in the fall. However, on the other hand, an additional factor impacting the hryvnia was damage to Ukraine’s energy and gas infrastructure, which leads to larger imports of gas and energy equipment.
“Short-term (1-1.5 weeks): the base corridor is UAH 41.4-41.9/$1, with likely fluctuations and trending toward the upper limit,” the experts said.
They expect the exchange rate to stay within UAH 41.30-UAH 42.00/$1 in the med-term (2-3 months). They believe that if the U.S. Federal Reserve decides to lower its benchmark interest rate in October, and if the impact of the risks of a trade war between the United States and China declines, the U.S. dollar may start to strengthen overall on the international market, which will also affect the exchange rate in Ukraine.
However, the internal Ukrainian context of expectations of further large-scale damage to infrastructure, a worse situation in the energy sector, as well as high demand for larger imports could prompt the dollar to strengthen on the Ukrainian forex market even faster.
“Long-term (6+ months): the baseline scenario is still for a gradual hryvnia devaluation. If international assistance is provided at a rhythmic pace, the target is UAH 43.20- UAH 44.40 UAH/$ by mid-2026, given the current context of the situation in Ukraine,” media quoted the group’s experts as saying.
