After the New Year's break, the fluctuation of the hryvnia exchange rate became a topic of discussion not only in professional economic circles but also in the media and Ukrainian society in general. What awaits the national currency and are there risks that people will "storm" exchange offices in the near future, UNN asked financial analyst and economic expert Serhiy Fursa.
Details
He emphasizes: the current changes should not be described as a record decline or depreciation of the hryvnia, because it is a short-term amplitude that does not change the fundamental picture.
According to the expert, the primary cause of fluctuations lies in seasonality, which manifested itself even before the full-scale war.
We traditionally have seasonality. The mechanics are simple and have long been known to financiers: at the end of the year, the budget "tops up" the economy with hryvnias through the closure of programs and payments, as expenses plus the 13th salary for public sector employees are incurred. A lot of hryvnias enter the financial system. Well, and of course, some of them go to the foreign exchange market
The financial analyst emphasizes: increased demand for foreign currency at the beginning of the year in this context is far from an anomaly, but an annual recurring scenario.
Serhiy Fursa also draws attention to the fact that in Ukraine, the NBU is currently the main director of the exchange rate. Therefore, the latter is maintained at the level at which "the National Bank wants to see it."
Two important things follow from this.
First: sharp "spontaneous" jumps in the exchange rate are limited by the regulator's tools and the volume of reserves.
Currently, the NBU's reserves are at a record level
Second: the National Bank deliberately accustoms the market to wider movements so as not to create the illusion of eternal stability.
The NBU promised to give a greater amplitude... so that people would not get used to the fact that the exchange rate is stable, because it is harmful
To the direct question of whether the situation with the hryvnia can be interpreted as the start of a new exchange rate policy of the financial regulator, Serhiy Fursa answers unequivocally:
No, this is not the beginning of anything new
Separately, the expert emphasizes that there is currently no financial logic to forecast the basic hryvnia exchange rate for the coming weeks, as a 2% change in the exchange rate cannot fundamentally affect anything.
Continuing the topic of forecasts, Fursa notes that, for now, the dollar exchange rate should be taken as the main prognostic criterion.
We have the dollar as the exchange rate benchmark, and the euro exchange rate through the dollar-euro cross-rate. That is, the euro for internal exchange rate logic is often a derivative of changes in the EUR/USD pair
He outlines the currency beacon until the end of the year as follows:
Let's take 44 hryvnias per dollar, somewhere around this mark. A potential weakening of the hryvnia could be from 42.3 to 44 hryvnias. In the current situation, this is rather a smooth trajectory than a collapse, but it directly tells the market: a gradual weakening within a few percent can be the basic scenario
Serhiy Fursa also draws attention to the fact that for the exchange rate, not so much the trade balance or public panic at exchange offices remains critical, but rather the stability of the external financial circuit. And here the rhetoric is no longer about fluctuations "right-left," but about clear boundaries.
If external assistance suddenly stopped (if Ukraine, for example, failed the IMF program) and given that all financing is tied to the IMF program... We (meaning the state - ed.) cannot allow any actions that would lead to the loss of external financing
In practice, for average buyers and Ukrainian businesses, everything that has been happening with the hryvnia since the New Year means the following: if the expected annual weakening of the exchange rate is moderate, and hryvnia instruments offer a high interest rate, the motivation to "flee into foreign currency" weakens.
That is why Fursa advises Ukrainians not to run to exchange offices, but rather to consider purchasing government bonds with the available money, the annual interest rate on which is 16%. Because when the population and businesses do not reinforce currency demand with the motivation to buy banknotes "for a rainy day," it is cheaper for the regulator to maintain a managed trajectory, and the exchange rate reacts less to informational fluctuations.