The second half of May for the foreign exchange market will be calmer and more predictable, and sharp fluctuations in the exchange rate should not be expected. However, experts say that the controlled devaluation of the hryvnia will continue.
Over the past week, the official NBU dollar exchange rate fell by 29 kopecks. If on May 13 the dollar cost 39.72 UAH/USD, then on May 17 it was 39.43 UAH/USD. Although the cash dollar crossed the 40 UAH mark, minor fluctuations were observed in the foreign exchange market during May.
How the dollar exchange rate changed during the week from May 13 to May 17
Last week, the hryvnia strengthened somewhat in interbank trading. If on Friday, May 10, the dollar exchange rate was 39.56 UAH, then as of Friday, May 17, the official rate decreased by 14 kopecks and amounted to 39.42 UAH.
Last week a cash dollar was already worth more than 40 UAH. Sales of American currency ranged from 39.9 to 40 UAH per dollar.
Anna Zolotko, director of the treasury operations department at Unex Bank, noted that trading on the Verkhovna Rada at the beginning of last week was marked by a moderate increase in quotations. This exchange rate trend was expected: by May 20, businesses must pay quarterly taxes, so the supply of foreign currency on the market increased towards the end of the week.
“The reaction of the cash market to interbank exchange rate trends turned out to be very weak. At the beginning of last week, the value of the US dollar here also increased moderately and at some points the rate even crossed the mark of 40.0 UAH/dollar, but the strengthening of the hryvnia on the Verkhovna Rada has not yet led to a comparable reduction in the price of cash currency. On Friday morning, the dollar selling rate was in the range of 39.8-39.9 UAH/USD,” says Zolotko.
Alexander Khmelevsky, Candidate of Economic Sciences, an independent expert, says that in general, slight fluctuations in the exchange rate are observed during May. The dollar exchange rate was in the range of 39.23-39.71 UAH. per dollar and 42.20-42.92 UAH. per euro.
Trading volumes on the interbank market remain mediocre, slightly above $200 million per day. The market is calm
Zolotko adds that market participants mainly assess the current trend towards strengthening the non-cash currency as temporary. This is precisely what explains the very weak reaction of the cash exchange rate to the trends of the ASU.
What will the dollar exchange rate be from May 20 to May 24?
Khmelevsky predicts that the hryvnia is expected to depreciate slightly this week. Nevertheless, the dollar exchange rate will remain in the range of UAH 39.30–39.90, and the euro exchange rate of UAH 42.20–43.00. According to the expert, significant changes in the exchange rate should not be expected this week.
Experts are convinced that in the short term the prospects for further strengthening of the hryvnia are limited. Until May 20, due to the payment of taxes by businesses, a downward trend in the exchange rate may still persist in the market, but this week we should expect a correction and growth in quotations on the ASU. Considering the fact that the cash rate remained at relatively high levels this week, most likely, the rise in dollar price on the ASU will not lead to a comparable increase in the rate in the cash segment. Anna Zolotko talks about this.
In my opinion, during this week the value of the dollar will be in the range of 39.7–40.2 UAH/dollar.
Taras Lesovoy, head of the treasury department at Globus Bank, explains that the second half of May for the foreign exchange market will be calmer and more predictable. Further controlled devaluation of the hryvnia will be important for the market. At the end of the year, according to forecasts, it should amount to another 3% of the initial exchange rate in January, if the dollar exchange rate coincides with the budgeted rate, which is 40.7 UAH.
“We assume that in May the hryvnia against the dollar may lose from UAH 0.2 to UAH 0.5 - and the exchange rate will be in the range of UAH 39.7-40. That is, the rate of devaluation will be less than the previous month,” says Lesovoy.
What will affect exchange rates in the near future?
The exchange rate remains stable for a number of reasons. One of them is the decision to provide Ukraine with international assistance from the United States and a tranche from the EU. The volume of macro-financial assistance that Ukraine will be able to receive by the end of the year coincides with the planned $37 billion to cover part of the budget expenses
Taras Lesovoy adds that since May 4, the National Bank of Ukraine has continued to implement a strategy for further liberalization of the market, eliminating a number of restrictions for business, providing $5.5 billion for these needs, which should be quite enough to maintain a balance between supply and demand. Consequently, there will be no imbalance that could potentially affect exchange rates.
“As of the beginning of May, the regulator’s international reserves amounted to more than $43 billion, which is quite enough for the regulator to take more bold actions. Export earnings, on the basis of which international foreign exchange reserves are formed, should be at a decent level, because the volume of exports has almost reached the pre-war level,” Lesovoy noted.
