Hryvnia breaks historic low, but the NBU is ready to “take action”
18 July 2024 10:21
The National Bank of Ukraine has told Interfax-Ukraine that the pace of the hryvnia’s decline in recent weeks could pose additional risks to the stability of the foreign exchange market and price stability. However, the NBU is ready to take measures to stabilise the foreign exchange market due to the recent weakening of the hryvnia, reports "Komersant Ukrainian" news agency citing the agency.
The regulator explains that so far, despite some weakening of the hryvnia, the exchange rate dynamics has been in line with the NBU’s goal of moderate inflation. This is confirmed by inflation approaching the 5% target in June.
The NBU attributes the current hryvnia depreciation to several factors. These include an increase in net demand for foreign currency over the past two months due to higher budget spending, the May currency liberalisation, and a temporary reduction in the supply of foreign currency by the agricultural sector.
Despite these challenges, the NBU assures that there are all the prerequisites to ensure the stability of the FX market. The NBU expects to receive foreign currency from the sale of the new harvest, and the functioning of the sea corridor creates opportunities for active exports.
In addition, the NBU expects to receive $3.9 billion from the US this month, which will allow international reserves to exceed $40 billion again.
However, the NBU has not yet indicated what measures it is ready to take there.
It is worth noting that on 17 July, the NBU set a new historical low for the official hryvnia exchange rate at 41.4627 UAH/$1. Since the beginning of the year, the dollar has risen by 9.1%, or UAH 3.46, at the official exchange rate.
Experts predict that by the end of the year the exchange rate could reach 42 UAH/$1, which is generally in line with the figure set in the state budget.
