ByadminThe dollar is beyond 40 to exchange, up 25% against hryvnia
What are the reasons for the National Bank of Ukraine to raise it and what is to expect?
Within almost five months we have been witnessing war, the Ukrainian and global economy went through significant changes. The state budget revenue is suffice hardly to cover a third of the government’s funding needs. Despite Ukraine has got plenty of financial support claims globally, yet in reality international money are coming in a small amount bringing controversies.
More than 100 billion hryvnias are spent monthly in Ukraine to support the army, healthcare, salaries and help in public sector. Those facts have triggered the National Bank to back up by printing hryvnia to finance the needs of the state, making it the biggest supporter of the national army. The US has lost the image of to-be saviour while shifting its focus making the hryvnia February exchange rate of 29.25 for 1 dollar irrelevant.
In spite of the facts, the National Bank changed the exchange rate of the hryvnia against the US dollar to the level of UAH 36.5686/USD. The new exchange rate to become an anchor for the economy and bring it steadiness to face uncertainty. The fixed exchange rate policy in future will allow the National Bank to take control over inflation hikes, as well as maintain the smooth financial operations.
The conditions for selling and buying currency in the cash and non-cash market remain unchanged. The sale and buy of non-cash foreign currency at the foreign exchange market will continue at a level that cannot deviate by more than 1% from the fixed rate. The currency cash-selling rate at the foreign exchange market will depend on the supply and demand. It worth noting, that since July 22, the dollar costs UAH 40 or UAH 40.5 in banks and exchange offices Ukraine-wide depending on demand and the region.
Expectations:
According to the estimates of the National Bank, the new exchange rate will increase the inflow and, accordingly, the sale of foreign exchange earnings by exporters, minimizing the scalping of market participants and aligning with expectations.
The hryvnia exchange rate change will only partially accelerate the price growth. At the same time, fixing its new level will allow the NBU to maintain control over price hikes in Ukraine.
Additional steps:
The NBU allowed banks from July 21, 2022 to sell non-cash currency to citizens with subsequent placement on a deposit for a period of three calendar months without the right to early termination within a monthly limit of UAH 50,000 (equivalent). This will create an alternative to investing in cash, which will reduce the demand for it and pressure on the exchange rate in the cash segment of the foreign exchange market.
Besides,
Outlook:
Making the exchange rate and financial environment in Ukraine steady in the long term will depend on the economic policy of the country. All restrictions introduced since the beginning of the war are temporary measures. At the same time, they will allow the economy to withstand the war and contribute to its faster recovery after our Victory.
