Dollar soars - financier explains reasons and gives advice to Ukrainians

The National Bank of Ukraine set the official dollar exchange rate at 43.81 hryvnias per dollar for Friday, March 6. Compared to the previous indicator, the hryvnia weakened by 9 kopecks. Thus, the US currency exchange rate has been updating its historical maximum in Ukraine for the second day in a row. At the same time, the dollar is sold even more expensively in cash exchange offices.

The growth of the dollar exchange rate in Ukraine in recent days is associated not only with internal economic factors but also with global tensions in the world, particularly the war in the Middle East. The foreign exchange market is influenced by both international processes and the behavior of Ukrainians themselves, who, in conditions of uncertainty, begin to buy currency more actively. Financier Viktor Halchynskyi told UNN about this in a comment.

Global instability pushes the dollar up

According to the expert, the current growth of the dollar exchange rate has primarily global causes. In periods of geopolitical instability and military conflicts, the dollar traditionally strengthens in world markets.

The financier explains that the situation in the Persian Gulf and the general tension in the Middle East create additional demand for the American currency.

We are observing a rush caused by events in the world, particularly what is happening in the Persian Gulf. There are two factors. The first is the sudden situational strengthening of the dollar in the world, because the dollar always becomes more expensive when the United States starts a war and it lasts.

According to him, global investors in such conditions seek to transfer assets into dollars, which are traditionally considered the most stable currency during crises.

Impact of the oil market and fear of rising fuel prices

The second important factor currently affecting the foreign exchange market is fears of a possible rise in fuel prices.

The expert notes that any tension in the Persian Gulf region immediately causes a reaction in energy markets, as a significant part of the world's oil reserves is concentrated there.

The second is concern. I wouldn't say it's panic, but a certain rush related to possible impacts on fuel and possible price increases.

He adds that these factors often trigger a psychological market reaction, when people start buying currency in advance, expecting goods to become more expensive.

Foreign exchange market reaction

According to Halchynskyi, the growth of the dollar exchange rate was noticeable primarily in the interbank market. At the same time, a certain decrease in tension is already being observed.

We saw that the demand for currency increased in the interbank market. But already today, by the way, both the dollar and the euro have fallen slightly in price - the rush is starting to subside.

However, in the cash market, the situation looks different, as the behavior of the population often differs from the reaction of banks and financial institutions.

In the cash market, people saw uncertainty and instability, and accordingly began to buy more currency to, in their opinion, save their funds from inflation.

What will happen to the dollar exchange rate next?

According to the financier, the further dynamics of the foreign exchange market will largely depend on how the situation in the Middle East develops.

If the conflict drags on, the dollar may rise for some time, but will eventually stabilize.

If the war is protracted, as in our case, the dollar will rise to a certain limit and then stabilize. Everything will depend on supply and demand.

At the same time, he emphasizes that the situation in the energy markets will be a critical factor.

If there is no major problem with the supply of oil and fuel and there is no strong impact on the world market, then the exchange rate will stabilize.

Is the hryvnia threatened by a sharp fall?

Separately, the financier drew attention to the situation inside Ukraine. According to him, today the hryvnia has significantly stronger positions than in previous years.

This is due to record gold and foreign exchange reserves and the support of international partners.

Today, the largest gold and foreign exchange reserves in the history of Ukraine have been formed. They were formed thanks to international assistance and the policy of the National Bank.

In addition, NBU currency interventions play an important role.

The actions of the National Bank and its interventions will not allow the hryvnia to fall sharply or fluctuate very sharply.

However, he admits that general economic factors may still gradually affect the exchange rate.

Given the economic situation and general inflation, a smooth devaluation of the hryvnia will happen one way or another.

What Ukrainians should do

Against the background of exchange rate fluctuations, many Ukrainians began to wonder whether it is worth actively buying currency now.

Halchynskyi advises not to give in to emotions and to assess the situation rationally.

There will be no sharp fluctuations in Ukraine for now. But we understand that a smooth devaluation will happen one way or another.

At the same time, the expert emphasizes that other economic processes, in particular the rise in energy prices, can also affect the exchange rate.

If the processes of rising fuel prices begin to develop and a chain of price increases is formed, this, of course, will also affect the exchange rate.

In general, according to Halchynskyi, Ukrainians should remain calm, not succumb to short-term market sentiments, and make financial decisions taking into account long-term stability.

Those who wish can take advantage of the situation now - for example, if funds in hryvnia are needed, part of the currency can be sold at a higher price.

Thus, the current rise of the dollar has primarily external causes - first of all, geopolitical tension and risks for the global energy market. At the same time, Ukraine's internal financial system currently has sufficient tools to curb sharp exchange rate fluctuations. It is expected that in the absence of a large-scale escalation in the Middle East, the foreign exchange market will gradually stabilize, although the long-term trend of slow hryvnia devaluation will still continue.