The dollar has gone beyond 40: will the hryvnia collapse before the end of the year?

The dollar confidently overcomes the psychological barrier of 40 hryvnia. Cash “green” is already sold everywhere above this level, although not all exchange offices buy it at this price yet

Fluctuations or trend changes

The cash dollar exchange rate in Ukraine has crossed the 40 hryvnia mark. The average selling rate of American currency at exchange offices on the morning of May 21 was 40.05 hryvnia. At the cash desks of most Ukrainian banks, “green” is also sold for 40 hryvnia and more.

May turned out to be a rather uneven month for the foreign exchange market. In the early days, the dollar cost about 39.7 hryvnia, and on May 7 it fell to 39.3 hryvnia. Then the rate jumped again to 39.7 hryvnia, but in the middle of the month it dropped to 39.35 hryvnia.

But there were no higher exchange rates than now this month. In this regard, the question arises: are we dealing with another fluctuation, or is this a change in trend?

According to financial analyst Andrey Shevchishin, the rate at exchange offices has been at 40 hryvnia/dollar for some time. Therefore, there is no point in thinking that something extraordinary is happening.

“The main thing here is interbank. And he approached the level of 39.84. On the approach to 40 hryvnia, the National Bank is increasing its interventions and starting to bring down the exchange rate,” the expert said in a conversation.

He recalled that the previous week, when the NBU announced another currency liberalization, the dollar exchange rate did not rise and even dropped to 39.3 hryvnia.

“That is, such fluctuations are quite acceptable. The course was already 40. The situation is completely controllable, and I see no reason to talk about a change in the trend,” Shevchishin said.

In his opinion, in the near future the National Bank will enter the market with intervention and thus reduce the exchange rate. As for the cash dollar, in exchange offices it will remain at levels exceeding 40 hryvnia for some time: “Until the exchange rate on the interbank market rolls back to the level of 39.5.”

The National Bank has its finger on the pulse

However, the dollar exchange rate will most likely continue to rise gradually.

“The National Bank does not want to undertake a significant devaluation, because this will mean large expenses for servicing the external debt,” explained CASE Ukraine expert Vladimir Dubrovsky in a commentary to the publication. – Another limitation for the National Bank is that deposits in hryvnia remain more attractive than purchasing foreign currency. He has every opportunity to control the rate, since the rate is actually supported by the sale of currency that comes from our partners. It can be sold more, or less, but, in any case, it (the exchange rate) is not balanced by exports and imports, but is supported by these injections. Therefore, we can hope that it will be relatively stable, but with a very smooth devaluation trend.”

The founder of the Univer investment group, Taras Kozak, shares a similar opinion. He noted that since the exchange rate in Ukraine is now actually set by the regulator, it is very difficult to predict it.

“Even if the National Bank lowers the hryvnia, it very carefully ensures that the profitability of hryvnia instruments is higher than the rate of devaluation. Relatively speaking, if government bonds (domestic government bonds) bring approximately 50 kopecks per month for each dollar, then the devaluation is at the level of 30-40 kopecks,” the expert said in a commentary to Apostrophe.

Thus, he believes, a very smooth and controlled devaluation of the hryvnia will continue.

“From general considerations, the rate of 39.5-40-40.5 is for a long time, at least until the fall, since in the fall our demand for the dollar traditionally increases, importers buy a lot of goods for the New Year holidays and the rate increases,” says Kozak. “I don’t think it will be significant this year, because we have huge gold and foreign exchange reserves and American financing has opened up.”

Hryvnia under pressure IPSO

Experts interviewed by Apostrophe are confident that there are no economic reasons for a significant increase in the dollar-hryvnia exchange rate today. But it can happen as a result of negative events in the military-political sphere. However, this is even more difficult to predict than the actions of the National Bank.

“If something happens (in this area), there may be sharp fluctuations,” warns Taras Kozak.

According to Andriy Shevchishin, there is also a slight risk of turbulence due to the development of the theme of the illegitimacy of Ukrainian President Vladimir Zelensky after May 20.

“The IPSO is spreading on social networks about Zelensky’s illegitimacy, although I don’t think this can have any impact (on the exchange rate),” says the expert. – I am more concerned about the impact of the law on mobilization and its first consequence – crossing the border, how will logistics work between the regions? But everything seems to be calm for now.”

Thus, if there are no major shocks, at the end of the year the dollar exchange rate will be in the range of 40-41 hryvnia.

“You need to look at the numbers that are in the budget,” sums up Vladimir Dubrovsky. “I think that the National Bank will focus on them in this case.”

Let us remind you that the 2024 budget includes an average annual exchange rate of 40.7 hryvnia/dollar.