Last week, the official NBU rate increased slightly. On Monday, December 4, the rate was 36.46 UAH/$, and on Sunday, December 10, it rose to 36.67 UAH/$. On the cash market, the rate fluctuated in the range from 36.8 to 37.4 UAH/$.
How the hryvnia exchange rate changed in the week from December 4 to December 10
The national currency has traditionally remained stable thanks to NBU interventions. Last week the regulator:
- bought $1.99 million.
- sold $546 million.
That is, on a weekly basis, the NBU’s gold and foreign exchange reserves decreased by $544 million.
During this period, according to Ukrdiling data, the exchange rate on the interbank market changed as follows:
- On December 4, the dollar could be bought and sold for 36.57–36.59 UAH/$.
- On December 8, the dollar was trading at 36.76-36.78 UAH/$.
This means that last week the rate increased by 19 kopecks.
Meanwhile, according to the portal finfnce.ua, the situation on the cash market was as follows:
- On December 4, Ukrainians could buy or sell dollars in the range of 36.80-37.39 UAH/$.
- On December 8, this dynamics increased to the level of 36.86-37.40 UAH/$.
That is, over the past week the rate increased by 6 kopecks.
What influenced the hryvnia exchange rate in the week from December 4 to December 10
Maxim Oryshchak, an analyst at the Center for Exchange Technologies (CBT), explains in a commentary to Delo.ua that last week the process of convergence accelerated on the Ukrainian foreign exchange market, that is, bank rates became closer to the NBU values.
“The official US dollar exchange rate increased by 0.5% to UAH 36.67. The average cost of American currency in Ukrainian banks increased by only 0.1% - to UAH 37.45. Same with the euro exchange rate. According to the NBU, the euro fell by 0.1%, to UAH 39.60, and in banks, the European currency became cheaper by 0.3%, to UAH 40.60,” says the expert.
According to him, several internal events influenced this dynamics in early December.
First. Ukraine's reserves fell for the fourth month in a row, but the pace of the negative trend became less - 1.8% in October ($38.97 billion) and 0.5% in November ($38.78 billion).
“This trend became possible thanks to the allocated assistance from Ukraine’s partner countries. The NBU’s foreign exchange interventions in November at the level of $2.45 billion reduced the country’s international reserves to $36.5 billion,” explains Oryshchak.
Second. As for the inflation statistics in Ukraine, there was a real surprise here. The consumer price index (CPI) was expected to end the disinflationary trend in November, but it continued. CPI in annual terms is 5.1% versus 5.3% in October.
“This gives the NBU the opportunity for another bold reduction in the interest rate,” says Oryshchak.
What awaits the hryvnia exchange rate in the week from December 11 to 17
As Taras Lesovoy, head of the treasury department at GLOBUS BANK, tells Delo.ua, there should be no global exchange rate changes next week. In particular, it is likely that the fluctuation corridor will be:
- on the interbank market - within 36.4-37 UAH/$ and 39-40 UAH/€,
- on the cash market – 36.8-37.5 UAH/$ and 39-41 UAH/€.
“The only difference from last week’s situation may be a “seasonal” increase in supply on the cash market, as actually happens every year on the eve of major holidays,” explains the banker.
That is, according to Lesovoy, currency trends will depend on the following factors:
- The interbank market will operate under a “managed flexibility” regime, providing for free exchange rate formation, but with periodic regulation by the NBU of the level of demand and supply, measured by the volume of foreign exchange interventions.
- When setting rates, the cash market will be guided primarily by interbank exchange rate indicators.
- The abolition of currency restrictions on the cash market has actually united the rates of banks and exchange offices, increasing competition, which will have a positive effect on the rate.
- It is expected that changes in rates will be frequent and varied, but their amplitude will not go beyond the exchange rate corridors, that is, we should not expect any rapid ups or downs.
- On the eve of the holidays, it is expected that supply on the cash market may increase by 10-15%, which will also affect current rates.
- The difference between non-cash and cash rates will remain minimal, one might even say “penny”: at the level of 0.2-0.3 UAH.
- The difference between the buying and selling rates on the interbank market will not exceed 0.1 UAH, and on the cash market – 0.2 UAH. Current fluctuations will be within UAH 0.2 on the interbank market and UAH 0.3 on the cash market.
What events will affect the hryvnia in the week from December 11 to 17
This week there will be even more internal events, notes Maxim Oryshchak. In particular:
- On Monday, December 11, Ukraine's GDP data for the third quarter will be released. The growth rate of the Ukrainian economy could slow down from 19.5% to 11% y/y. This is bad for the hryvnia.
- On Wednesday, December 13, attention will be focused on the results of the NBU meeting. The regulator will most likely reduce the interest rate from 16 to 14-15%. In addition, signals about future rate actions are interesting.
- On Friday, December 15, data on Ukrainian foreign trade for October will be released. It is expected that the trade deficit could increase from $2.73 billion to $2.80 billion. This is bad for the hryvnia.
In addition to internal ones, investors will also monitor external events, notes Oryshchak. Among them:
- On Tuesday, December 12, the US will present November inflation statistics. The consumer price index (CPI) in annual terms should decrease from 3.2% to 3.1%. This is a reason for weakness for the US dollar.
- On Wednesday, December 13, the results of the Fed meeting will be published. The discount rate should remain at 5.50%, probability 97%.
“But markets are more interested in comments about the meeting in March. The probability of the first reduction at the March meeting is estimated at 55%. If the head of the Fed signals that this assessment is correct, the US dollar will decline,” explains the expert.
As a result, in the week from December 11 to 17, the national and American currencies may receive a number of negative news: “But for the hryvnia, such factors will be blocked by NBU interventions, but not for the US dollar. This means that the hryvnia should be stronger than the US dollar, but weaker for the euro, where there will be no such negativity,” says Maxim Oryshchak.
In his opinion, the official NBU rate could be as follows:
- for the US dollar – it will remain about 36.40-36.60 UAH/$,
- for the euro – will increase to 39.80 UAH/€.
And in the cash market there should be such dynamics:
- in the country's banks, the average value of the American currency may move to the lower limit of the range of 37.20-37.60 UAH/$.
- the average cost of the euro may remain in the range of 40.50–40.90 UAH/€.
What will happen to the hryvnia exchange rate until the end of December?
Banker Taras Lesovoy says that the further situation on the market over the course of two weeks will depend on a number of factors:
- The volumes of future macro-financial support for Ukraine for 2024, in particular, the expected decision on providing assistance from the United States.
- The export situation: solving the problem of blocking the border by Polish carriers.
- The situation at the front and countering hostile shelling of critical infrastructure.
- Plans and tactics of the regulator in the interbank market. We are mainly talking about the volume of interventions that can further satisfy demand if its level is much higher than supply.
“Thus, the foreign exchange market will be quite stable, albeit with fairly fluid changes. A situational decrease in the cash rate with a subsequent vector to the interbank rate is possible. However, for now this should be treated with some caution, because this may turn out to be purely a “holiday trend,” the expert believes.
