The Ukrainian currency recently showed an uptrend after slipping in April amid Russia’s military escalation. So, should Ukrainians be worried about the hryvnia exchange rate over the next summer vacation?

The Ukrainian currency in the last weeks of spring pleased citizens with stability.

After a temporary weakening in April, when the hryvnia crossed the 28 UAH / USD mark, the situation improved and throughout May the national currency strengthened by 50 kopiykas. On the last day of spring, the National Bank set the official rate at 27.50 UAH per dollar.

The weakening of the Ukrainian currency in April was linked to the escalation of the military conflict in the east of the country, when Putin’s Russia began to draw troops to the Ukrainian border.

Under these conditions, non-resident investors who previously actively bought domestic government bonds should reduce the demand for Ukrainian securities.

National Bank Governor Kyrylo Shevchenko also noted an increase in demand for foreign currency in the Ukrainian market from non-residents due to rising geopolitical tensions.

“Before the build-up of Russian troops, investors and non-residents alike were actively buying government bonds, even despite the delay in the IMF program review. Following the news of the escalation, we felt a additional demand from non-residents to buy foreign currency, so the NBU intervened and, thanks to the actions of the National Bank, we managed to smooth out this demand, ”said the main banker.

Improvement of the situation

Following the announcement of the withdrawal of part of the Russian troops from the Ukrainian borders, the situation on the national currency market stabilized and the exchange rate of the hryvnia gradually increased.

Experts of the financial group ICU favorably assess the position of hryvnia in the foreign exchange market and forecast its strengthening in the first half of the year to 27 UAH / USD and the rate of 27.5-28 UAH per dollar by the end of the year.

Analysts point out that high real rates, a rapid recovery of the national economy and favorable external conditions are supporting the rate of the hryvnia.

The favorable terms of trade with foreign counterparts and the restriction of international tourism, as it objectively hinders the purchase of foreign currency by Ukrainian citizens, as well as the reestablishment of the inflow of portfolio investments, continue to positively influence Ukraine’s external balance.

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This expands the NBU’s international reserves, which reached $ 29 billion at the end of 2020, the highest level in eight years.

The main risks, experts say, are currently associated with a slowdown in reforms and the uncertainty of relations with the main creditor – the International Monetary Fund.

Summer outlook

Some Ukrainians will be going on vacation abroad in the coming months and will be interested in buying foreign currency.

In addition, a large portion of Ukrainians will spend the summer in their home country, and perhaps some will be forced to sell dollar savings in order to pay for well-deserved vacations or long-delayed home renovations.

Both categories are interested in how the Ukrainian currency behaves during the holidays, wondering whether it is about to strengthen or fall.

According to RoboForex analyst Andriy Hoilov, summer is the most favorable period for the national currency of Ukraine in the interbank market.

“Following the decision of the Russian Federation to withdraw its troops from the border with Ukraine, the hryvnia has started to regain ground. First, non-residents stopped selling government bonds in the secondary market. However, they are in no rush to actively increase their portfolios in these stocks. Over the past week, their investments only increased by 280 million UAH, reaching 97.53 billion UAH, ”Hoilov said.

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Analyst notes state regulator has not entered the interbank market with interventions for more than two months already, and expects NBU to appear at auction only if there is a rapid strengthening of the hryvnia.

There will be no large payments on Ukraine’s external debt, which would lead to a reduction in the country’s foreign exchange reserves, until September, so the regulator will remain relatively calm.

“Given the current dynamics of world prices of Ukrainian exports, I assume an increase in the supply of foreign currency for steelworkers and farmers. This will have a positive effect on the hryvnia exchange rate and allow the NBU to replenish its foreign exchange reserves. Demand from importers will remain at the current level, ”Hoilov stressed.

The expert predicts that, in the event that no new political risk arises, the exchange rate of the hryvnia against the dollar and the euro will remain in narrow ranges throughout the summer.

“The hryvnia against the US dollar is unlikely to exceed the limits of the channel UAH 27.50-27.95 / USD. The single European currency, I believe, will be in the corridor UAH 33.50-33.85 / EUR” , Hoilov said.

Tips for saving

Serhiy Saroyan, head of performance management, also believes that no dramatic changes in the forex market are expected this summer.

“Until the end of the summer, the situation on the forex market is not expected to change. Now, investors expect ultra-low rates to continue in the United States and tightening monetary policy in developing economies, leading to a flow of capital into risky instruments. This dynamic will contribute to the weakness of the dollar and will support the rate of local currencies like the hryvnia, ”Saroyan said.

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The expert notes that there is no serious reason to strengthen the hryvnia apart from the inflow of foreign capital in government bonds, but no tangible drop is worth waiting for either, because the Ukrainian economy is gradually recovering from the crisis and there are no negative feelings.

“We expect the rate to move in a range of 27.50 to 28.00 UAH / USD. It should be borne in mind that this year 585.13 billion UAH is to be paid on the debt of In addition, the peak payments will be in September: 20.37 billion in domestic debt and 81.4 billion in external debt. This means that the NBU has no motivation to strongly support the rate. to save money, it is better to choose a strong currency, for example, the depreciated dollar, “recommends Saroyan.

External factors and prospects for exiting the coronary heart attack

According to experts, the situation of the largest economy on the planet, the United States, will remain the main driver of the global financial market. There, large-scale tax incentives began to pay off: in the first quarter, the country’s GDP grew 6.4%.

If the US economy grows at such a rate, it may soon return to pre-crisis levels.

“As the economy recovers, Federal Reserve System officials will increasingly speak out about the need to change monetary policy and fight inflation. This should be accompanied by growing nervousness in the markets and an influx of money into defensive instruments, primarily the dollar. So, at current levels, the US currency looks attractive enough for those who will continue to buy it for a long time, ”Saroyan said.

Ukrainian financiers agree that the summer should be calm for the hryvnia: in the absence of force majeure, no significant fluctuations are expected in the foreign exchange market.

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We can also see that the situation with the coronavirus pandemic has stabilized somewhat in the country: the incidence rate has fallen, while the vaccination campaign is continuing, albeit at a modest pace.

The national economy is starting to recover, businesses are adjusting to new conditions, and export-oriented industries continue to operate proactively.

The rain-filled spring gives hope for a bountiful harvest in 2021, which means that Ukrainian agricultural exports will increase and, together with high world food prices, provide Ukraine with additional foreign exchange income.

Therefore, Ukrainians can make plans for the summer and enjoy a long-awaited vacation with a stable hryvnia exchange rate, not forgetting, of course, compliance with health security measures.

Kateryna Zhyriy