On the right track: ten main factors to strengthen the hryvnia in the spring of 2023

Since the beginning of 2023, the hryvnia has been gradually strengthening against the dollar in the cash market. This process has gained particular momentum in recent weeks, and the prerequisites for it Focus he analyzes in detail in his new review “Dollar – 37 hryvnia. Is it worth buying a currency when it is cheap?”

If Ukraine entered 2023 with an exchange rate of about 40 UAH/USD, then as of April 5, 2023, banks are selling the dollar at 37.2-37.9 UAH/USD and buying at 36.6-36.8 UAH/USD. So the cash rate has already approached the official NBU rate, which was set at 36.57 UAH/USD in July 2022.

Based on an expert survey Focus It highlights the following prerequisites that led to a noticeable strengthening of the hryvnia:

• The arrival of large volumes of international aid. According to Vitaliy Vavryshchuk, head of macroeconomic research of the ICU group, this helped restore NBU reserves to pre-war levels by the end of 2022. [до $28494,46 млрд] and actively use these funds to keep the hryvnia stable against the US dollar. The ICU expects funds from international donors to close the gap in the foreign exchange market in 2023.
• Citizens’ demand for foreign exchange has decreased. According to Anna Zolotko, Director of the Treasury Operations Department of Unex Bank, the foreign exchange buying volume in the non-cash market decreased to 311 million dollars in March, while this figure was 462 million dollars in February and 524 million dollars in January. . Focus It shows that the overall negative balance of foreign exchange transactions of citizens, which decreased from 20-25 million dollars per day in the winter months to 12-15 million dollars at the end of March, decreased.
• Cash hryvnia outflow from currency to consumer markets. In other words, citizens began to prefer to buy important things instead of investing in foreign currency.
• Preparing farmers for planting. As a matter of fact, at this stage, farmers most actively sell their foreign exchange earnings and savings.
• Cash demand decreased due to quarterly foreign currency deposits. In July 2022, the purchase of foreign currency by depositing with a 3-month maturity and favorable interest was offered to the citizens. Since then, this service has become quite popular.
• Recession in the economy. In 2022, Ukraine’s GDP fell by about a third due to the all-out occupation of the Russian Federation, and demand for the currency also decreased as economic activity cooled.
• The possibility of maintaining a constant NBU rate for 12-18 months. The preservation of this practice for the specified period is explained by a new memorandum with the IMF. This fact gave some confidence to foreign exchange market participants and citizens.
• The growing popularity of hryvnia deposits. According to Anna Zolotko, in March they became another currency competitor for Ukrainians. “The reports of high rates and an IMF program that will hold the official exchange rate stable for at least 12 months seem to have finally paid off. So far there are no official statistics for March, but by all indications, Zolotko sees the consequences of the increase in the volume of time deposits quite serious,” he said.
• Increasing the attractiveness of national currency government bonds. Sergey Kucheryavy, Director of the Liquidity and Securities Control Department of JSC Kredobank, also explains this trend with the decline in the population’s expectations for devaluation.
• Cover “online casino”. As stated in a comment Focus According to experts, the online casino activity has had an impact on the demand for foreign currency cash, says Anton Kurenniy, reseller of OTP’s Global Markets Department.

Will the influence of these factors continue in the future and how strong will the hryvnia get? Focus analyzes in detail in his review “Dollar – 37 hryvnia. Is it worth buying the currency when it is cheap?”

Moreover Focus In addition to keeping the exchange rate constant, it has been analyzed that a program with the IMF is foreseen in the near future, especially in the field of electricity tariffs.