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Dollar exchange rate rushed up again
29 December 2014
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Yesterday, the average weighted dollar exchange rate in the interbank market amounted to 15,37 USD/UAH. Decline in the price of the hryvnia began at the end of last week, on November.27. Dollar in the interbank market rose by 40 kopecks during the week. Two weeks earlier, hryvnia strengthened fr om 15.77 USD/UAH to 14.96 USD/UAH. A new round of devaluation frightened the population that yesterday already was buying foreign currency in the black market for 17 USD/UAH.

Straight ahead

"The rate of 17 USD/UAH is considered by bankers as "panic"."The rate found its stabilization at 15‑-16 USD/UAH”, Serhiy Chernenko, FUIB's Chairman of the Board, assures. Other bankers on condition of anonymity, called the equilibrium rate of 15.70-15.90 USD/UAH. It is the rate used by the banks allegedly to serve their clients-legal entities, the exporters and importers.

Still, a very limited amount of currency is traded in the interbank market. The average daily volume of currency trading in November was 205 million in dollar equivalent. But exporters have already started to sell currency in small amounts, bankers say. "The exporters' need for working capital is very large now, so whether they want to or not, they have to sell the foreign currency. Over the past few weeks the volume of exporters’ sales is growing. Imbalance, which is the difference between supply and demand, has reduced", says Serhiy Chernenko. According to him, if at the peak, around 2 billion UAH was at the accounts of the bank 2900, where importers bring hryvnia to buy foreign currency, now there is only about 700 million UAH. That means that the demand for currency fell more than twice.

But as the pent-up demand is still very high, the hryvnia continues to lose value. "Next year we can expect a "crawling" devaluation plus 10% of the current value to the exchange rate of 17-18 USD/UAH", said Chernenko. Similar predictions are also provided by the ICU group in its research reports. In this case, non-deliverable currency forwards (NDF), according to the information system TRData, for a period of 12 months were traded yesterday on 18,3-19,5 USD/UAH. This means that the real fears of financiers are even higher.

In the coming weeks the official hryvnia exchange rate will continue to approach 16 USD/UAH, analysts say. Devaluation was helped by the National Bank, which earlier this week asked the bankers to place market quotes on daily auctions, wh ere the indicative rates are defined. "If banks adhere to this principle (place market quotes. - Author), then the indicative rate will begin to reflect the mood of the market in the near future," said Valeriya Hontarieva, the chair of the NBU. In order to "stimulate" the bankers to place market quotations, NBU has even reduced the amount of currency sales at the daily auctions from $ 5 million to $ 3 million.

Hontarieva's Equilibrium

The task of the currency auctions is to find the equilibrium rate, keeps repeating Hontarieva. After all, according to officials in the National Bank, a fair rate in the interbank market can not be set today. After the introduction of a 0.5% tax for the Pension Fund on the purchase of currency, the interbank volumes fell sharply. As the result, starting with April 1, banks have practically stopped trading currencies with each other throughout the day. If in spring average daily trading volume reached $ 1 billion a day, now it is around $ 200 million. In such an illiquid market the price becomes ephemeral, say at the NBU. The real price, according to officials, is determined during the auction.

We should note that not all bankers share this view. Earlier, the Independent Association of Ukrainian Banks (NABU) proposed NBU to cancel currency auctions at all.

"Holding auctions which do not meet even one percent of the amount of the accumulated pent-up demand for the foreign currency only increases this demand, and the resulting exchange rate does not reflect the market rate or the weighted one, - the press service of NABU informed. - As a result, most exporters are not in a hurry to bring export revenues into Ukraine, trying to make settlements outside or to use different payment schemes, which banks can not influence."

The NBU did not succumb at the request of bankers. In turn, the market pays less and less attention to the official exchange rate, forcing the National Bank to be in the role of a pursuer at all times.

Source: Capital


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