Since the beginning of this year, the hryvnia has devalued by 3.1% against the US dollar. Over the course of the year (compared to April 2023), the cash hryvnia against the US dollar devalued by 4.4%, and compared to the state at the end of 2023, on the contrary, it revalued by 0.4%. This was reported by ex-chairman of the National Bank Council Bohdan Danylyshyn on Facebook.
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What are the reasons for exchange rate fluctuations
“There are market fluctuations in the exchange rate of the cash hryvnia, caused by situational factors – the cash segment of the market, despite the return of the market to average weekly volumes, promptly reacts to the interbank market, where the decisive factor influencing the rate remains the active interventions of the NBU. Another increase in demand from the population for foreign currency further accelerated devaluation processes in the market,” explained Danylyshyn.
Now, against the backdrop of new enemy attacks on infrastructure, the exchange rate is under additional threat.
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The influence of international support
Danilyshyn noted that in the second half of 2023, uncertainty arose regarding further external financial support for Ukraine.
“However, the NBU not only left in force its Strategy for easing foreign exchange restrictions, but also, from October 2023, abolished the fixed exchange rate regime and introduced a managed-flexible exchange rate regime. The costs of foreign exchange reserves to support the exchange rate immediately increased (from $1-2 billion with a fixed rate to 2-3 billion with a flexible rate per month). The NBU’s decision to liberalize the foreign exchange market in the context of a gigantic balance of payments deficit (over $30 billion per year) logically led to an increase in demand for foreign currency,” noted the former chairman of the NBU Council.
He added that the foreign trade deficit is the main factor behind the foreign exchange deficit.