Photo: the dollar exchange rate in January is expected to be at the level of December (Vitaly Nosach, RBC-Ukraine) Author: Alexander Belous
Expert: Taras Lesovoy
In January 2024, the Ukrainian foreign exchange market will be in the predicted state, and current exchange rate changes will not pose a threat to the overall situation.
Taras Lesovoy, head of the treasury department at Globus Bank, said this in a commentary to RBC-Ukraine.
“By many indications, in January the foreign exchange market will live in the December paradigm: it is unlikely that the regulator will change its own strategy aimed at maintaining a balance between supply and demand on the interbank market, as well as bringing the non-cash and cash rates closer together,” he said.
As the banker noted, one can expect that the NBU will resort to currency interventions if necessary.
“Accordingly, exchange rate indicators on the interbank market, despite their expected dynamism and multi-vector nature, will be within the boundaries of December,” the expert predicts.
Lesovoy noted that international foreign exchange reserves amount to about $39 billion, which virtually eliminates all questions about whether it is advisable to carry out powerful interventions. “These funds may be enough for quite a long time even without receiving international financial assistance or minimal export earnings,” he added.
As for the cash market, as Lesovoy recalled, for the last 2 months – since the introduction of the “managed flexibility” regime – exchange rate formation has been taking place on the basis of currency changes on the interbank market. And after the abolition of currency restrictions, competition between financial institutions for clients intensified in the cash market; in addition to the almost uniform cash exchange rate, the factor of exchange rate competition will also work (“they will rent more where the exchange rate is higher, and they will buy where the exchange rate is lower”).
The banker predicts that in January there may remain a minimal difference of up to 0.3-0.4 UAH between the interbank and cash market rates.
Factors influencing the market
In addition, Lesovoy noted, other main factors that will influence the foreign exchange market will be:
- The volume and timeliness of macro-financial support (the main thing in this issue is the certainty of the volume of assistance, as well as adherence to certain schedules);
- Unblocking western borders (export revenue is an important component of replenishing the country’s foreign exchange reserves);
- Military factors: the course of the war and its consequences (an indirect factor, which in certain circumstances may have signs of a systemic one).
“So, there is a high probability that exchange rate indicators on the foreign exchange market in January will be very similar to December ones. Current fluctuations/changes will not exceed 0.2 UAH, and the inter-rate difference in the non-cash market will be up to 0.1 UAH, and in cash – up to 0 , 2 UAH,” predicts Lesovoy.
Let us recall that at the end of December there was a sharp increase in the dollar exchange rate both on the interbank and cash markets. The dollar exchange rate increased on the interbank market to 38 hryvnia, in cash – to 39.0 hryvnia.