Several reasons contributed to the strengthening of the hryvnia, but the improvement may be temporary.
Despite a strict quarantine regime, emergencies and significant declines in entrepreneurial activity, dollar exchange rate fluctuations were not as significant as the Apocalypse forecast specifically determined. The dollar has lost 2.9-3.7% in the last one week.
But it is a matter of great pleasure – the International Monetary Fund has warned of a global economic downturn. The domestic foreign exchange market has its own reasons for warming and strengthening the hryvnia.
A good incentive for the situation with the dollar was progress in resolving the issue of financial support for Ukraine in IMF installments, which, in turn, was helped by the launch of the land market. It is worth noting that in the absence of cooperation with the IMF, the budget deficit would have to be financed by issuing burn reserves and national currency.
An important role was played by the decrease in consumer demand for imported goods and expensive equipment – the population is in no hurry to buy unnecessary goods during quarantine and exchange rate fluctuations. Thus, import-dependent enterprises do not seriously require currency.
In addition, tremendous enthusiasm about posture provoked by the introduction of quarantine and psychological factors has begun to diminish. This allows the National Bank to reduce and smooth the rate fluctuations, so as not to increase panic. As demand returned to pre-quarantine levels, NBU no longer sells foreign currency, but buys it in reserves.
Don’t forget about the calendar factors – Ukrainian farmers traditionally buy foreign currency after the sale of the crop in the autumn, and then sell the currency purchased in the spring. This creates an additional offer and affects the hryvnia exchange rate. The difference between the best-selling prices and foreign exchange purchases was reduced from 2.1% to 1.7%, as the selling rate fell faster than the purchase.
The downfall of the Ukrainian currency is largely dependent on the panic and stabilization of financial markets. Therefore, the encouraging trend of strengthening the hryvnia is likely to continue in the near future, unless the depreciation of the dollar in the interbank market is 26.4 USD and 26.3–26.7 UAH for cash in banks. And yet, the prospect threatens to be short-lived and bear the character of a temporary lull, not a final stabilization of mobility.
Read: In Privatbank he explained how much currency Ukrainians buy during quarantine.