The Ukrainian foreign exchange market continues to adapt to the National Bank’s innovations. The regulator believes that maintaining stability in the foreign exchange market will have a positive impact on the exchange rate and inflation expectations.
The situation on the foreign exchange market in Ukraine remained stable after the National Bank introduced a flexible exchange rate on October 3. The market continues to adapt to new conditions, the NBU press service reported on November 6.
Important
“The demand for foreign currency was expected to increase in the first two days of the new regime, but the NBU’s foreign exchange and verbal interventions minimized exchange rate fluctuations and demand stabilized,” the report said.
The Central Bank states that the foreign exchange market continues to adapt to new conditions:
- the exchange rate fluctuates moderately in both directions;
- volumes and balances of customer transactions are gradually returning to the levels of previous months;
- NBU interventions are being reduced.
“In the few weeks that the exchange rate regime has been in effect, the hryvnia has strengthened somewhat in both the interbank and cash markets. Maintaining stability in the foreign exchange market will have a positive impact on the exchange rate and inflation expectations.” the regulator noted.
At the same time, risks related to exchange rate stability and, accordingly, price dynamics in war conditions continue. As the NBU notes, the suspension of the “grain corridor” and serious damage to the port infrastructure due to Russian shelling have already led to a decrease in Ukraine’s foreign exchange earnings. Exports will suffer further if Russia continues terrorist attacks on logistics routes.
“The problem of delays in the repayment of foreign exchange earnings of individual exporters has also worsened. In addition, the rhythm of international aid flows has weakened in recent months. The fact that these risks have not yet been fully realized means that they should be ignored when making monetary decisions.” – noted in the message.
Important
Let us also remind you that the Central Bank reduced the discount rate from 20 percent to 16 percent. The rule went into effect on October 27. At the same time, the NBU did not change the interest rates on its transactions with banks.
- for three-month certificates of deposit the rate will correspond to “discount rate + 4 percentage points” (20%);
- for refinancing loans – “discount rate + 6 percentage points” (22%).
Let us also remind you that the expert said on November 2 what the situation of the dollar would be by the end of the year. According to former member of the NBU Council Vitaly Shapran, Ukraine has a large public debt that continues to increase during the war. Accordingly, the devaluation of the hryvnia should not be allowed because this would lead to global consequences.
Source: Focus
John Holton is a seasoned author and journalist, known for his expertise in economics. He currently works as a writer at 24 news breaker, where he provides readers with in-depth analysis and commentary on the latest economic developments. With a background in finance and a talent for explaining complex economic concepts in a clear and accessible way, John’s writing is a must-read for anyone interested in staying informed about the economy.