Analysis of the current situation on the Ukrainian currency market
In early May, the currency market of Ukraine entered the phase of controlled volatility – in the absence of excessive demand, but with increased speculative expectations.
In general, the situation remains relatively stable in the US dollar segment and tense in the euro segment.
Key facts and drivers:
- the dollar maintains a moderate downward trend-its position is under pressure from global rhetoric about the Fed rate cut and stagnation risks in the US economy.
- The euro, on the contrary, continues to grow in value due to the conjunctural strength of the European currency, pent-up demand for imports and a structural change in currency preferences of businesses and households towards the euro.
- The spread between buying and selling EUR remains at an abnormally high level – up to UAH 1.5-2, which signals increased nervousness of market operators and expectation of further movement.
Internal factors
Ø NBU in May continues the policy of cautious easing of currency restrictions: some forward transactions for banks and clients were resumed, opportunities for financing foreign representative offices of companies and settlements with corporate cards abroad were expanded. At the same time, the monthly limit of UAH 500 thousand was extended to more categories of transactions, which will partially reduce the attractiveness and weight of “grey” channels of capital withdrawal – this will add transparency to the market, and the statistics of the currency market will become more representative due to the correct and complete display of information on currency movements.
- At the same time, the NBU’s foreign exchange reserves grew to a record $46.7bn (+10.1% in April), thanks to the inflow of funds from the EU (ERA Loans programme) and the World Bank. Reduced NBU interventions and net purchases of currency by households increased stability in the interbank market and helped keep the official and market rates within forecast expectations.
- The approaching tax payment period, as well as seasonal intensification of operations in the energy sector and imported energy purchases will add liquidity to the market, but with high probability will not lead to noticeable exchange rate deviations, provided that key current conditions are maintained.
- Consumer inflation started to slow down in April, and the NBU expects it to decline to single digit rates from summer. This reduces pressure on the hryvnia, but core inflation and risks of tariff shock remain strong arguments not to relax prematurely.
International factors
Ø Globally, the situation remains mixed. The Fed has not changed the discount rate, but continues to communicate cautiously given inflation risks, unemployment and the threat of stagflation due to the Trump administration’s customs policies. The soft-landing scenario remains the baseline, but unwavering global confidence in the dollar is gradually eroding.
- At the same time, the Euro is consolidating as a currency increasingly used in global trade settlements. The potential strengthening of the EU’s political centre, intensified economic growth in the eurozone, increased consumption of European products in Ukraine, and the shift of many contracts to the euro are creating strong long-term demand.
- Stock and commodity markets are showing cautious optimism – investors are locking in profits after news of a possible deal between the US and the UK, as well as taking into account the likely resumption of negotiations and at least a temporary Russian ceasefire against Ukraine. However, volatility in the markets remains high – the global news background is not conducive to predictability and stabilisation.
Review of currency dynamics and forecast
USD exchange rate: dynamics and analysis
In May, the USD/Hryvnia exchange rate continued to move in a relatively narrow corridor, demonstrating insignificant volatility and stable demand. The market observed a gradual strengthening of the hryvnia at the beginning of the month.
The range of exchange rate movements in the cash segment over the last four weeks remained within the range of UAH 41.00 – UAH 41.90/$ with a peak on 30 April, when the average selling rate in banks reached UAH 41.89/$ and buying rate UAH 41.21/$. This movement was fully synchronised with the official NBU rate, which indicates that the regulator’s policy is in line with market realities.
At the same time, average spreads between buy and sell rates remain stable (within 60-70 kopecks), without significant widening, confirming the equilibrium in the currency market and sufficient competition among its operators, particularly in the cash segment.
In the interbank market, the volume of currency transactions decreased, but the NBU interventions also decreased, which gives grounds to speak about partial self-balancing of the market without excessive participation of the regulator.
Technical and psychological support for the market is provided by the growth of international reserves to $46.7bn (+10% in April), which forms an additional margin of stability for the policy of “managed flexibility”.
Globally, the dollar remains under pressure due to fears of stagflation in the US economy. The unchanged Fed Funds rate and Jerome Powell’s statement that there are no sufficient grounds for a rate cut in the near future restrain the dollar’s decline, but do not form preconditions for its strengthening