The “horror story” of Ukrainians – the US dollar at 40 – has become a reality. After the decision of the National Bank to change the official exchange rate of the hryvnia, the numbers in exchange offices quickly crept up. And the regulator had to deal with this as well: frightening rates on the scoreboard.
On July 21, the NBU lowered the hryvnia exchange rate against the dollar, which was fixed on February 24 at the level of UAH 29.25/USD. by 25 percent – up to UAH 36.57/USD. This decision was long overdue and, as analysts say, there was no alternative – the regulator had to sell a lot of currency from reserves to maintain the official exchange rate.
Both the regulator and financial experts assure that there are no economic reasons for the devaluation
If in January, by the beginning of the full-scale invasion of Russia, gold and foreign exchange reserves amounted to about 30 billion dollars, then by the end of June they were reduced to 22.8 billion. Thus, supporting the official exchange rate cost the central bank very dearly.
In addition, such a step should have a positive impact on Ukrainian exports and increase the inflow of foreign exchange earnings, especially if the Black Sea ports are unblocked and, accordingly, the volume of Ukrainian exports will increase. The NBU also noted that this will increase the competitiveness of our producers, bring exchange rates closer for various business groups and the population, and maintain the stability of the national economy in a war.
Immediately after the publication of the regulator’s decision, the hryvnia exchange rate in exchange offices began to decline rapidly. If from the beginning of July the national currency gradually became cheaper from 35.5 to 37 hryvnia/dollar, then after the change in the official exchange rate, a stunning devaluation began.
A week later, citizens saw frightening figures of 40 UAH/USD, that is, during this time, the hryvnia has weakened by 10 percent. But now the rate sometimes reaches 41-42 hryvnia per dollar. The euro does not lag behind, which now costs 42 hryvnia per unit of European currency.
Why is this happening? Both the regulator and financial experts assure that there are no economic reasons for the devaluation. Of course, the decision of the NBU to change the course should cause certain exchange rate fluctuations, but they have become too sharp.
Now non-banking financial institutions must provide information on exchange rates only near cash desks in a standardized form – copies of the order on setting the rates for buying and selling foreign currencies
The rapid weakening of the cash hryvnia was mainly speculative: exchangers want to capitalize on the difference in exchange rates, when panic prevails among the population, and people rush to buy dollars for their last hryvnia savings. In the conditions of war, citizens are already pessimistic about the economic prospects, and many believe that the depreciation of the hryvnia will continue.
To ease the devaluation pressure, the National Bank allowed banks to sell more foreign currency from July 27. If from April 14, banks could sell to the public only cash, which they previously bought from other customers, now the regulator has allowed an additional half of the non-cash currency purchased from citizens since that period to be sold additionally. Such a decision will increase the supply of foreign currency and a little to ease the panic demand.
Another method of dealing with speculation and panic turned out to be somewhat unexpected: on July 29, the regulator banned exchangers from posting data on exchange rates on the streets. From now on, non-bank financial institutions must provide information on exchange rates only at cash desks in a standardized form – copies of the order on setting the rates for buying and selling foreign currencies. The NBU made this decision “in order to minimize speculation and create a truly competitive environment.”
This step was perceived by experts and society ambiguously. Someone considered it correct because of the opportunity to divert the attention of the population from the growing dollar exchange rate, when people involuntarily see the board of the exchanger with menacing numbers on the streets. And some sarcastically also proposes to ban steles with the price of gasoline at gas stations and price tags in supermarkets, believing that this will not affect the depreciation of the hryvnia.
Now there are no economic factors for devaluation, and the permission of the NBU to sell more currency should stabilize the situation on the market
One way or another, according to experts’ forecasts, in the near future, the next wave of depreciation of the national currency should still calm down and, most likely, approach the official one. Now there are no economic factors for devaluation, and the permission of the NBU to sell more currency should stabilize the situation on the market.
In addition, this week the regulator purchased $682 million in reserves – this is the largest amount since November 2021, and sold only $32.9 million, despite the fact that until recently the amount of currency sales to maintain the official exchange rate was about $1 billion. every week.
The further prospect of the exchange rate will depend on the economic situation in the country, bled dry by the war. It will also be largely influenced by the provision of financial assistance to Ukraine from international partners. Therefore, accurate forecasts in war conditions should not be expected even from the best experts, but panicking and buying expensive currency is also not an option. We remain calm and work to win.