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Exchange Rate Persuasions
29 December 2014
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Briefly: The National Bank is concerned about the rise in price of dollar and expects from the bankers that they will keep the rate, which has already been exceeded by the quotes in the cash market, at up to 16 UAH/$. The situation in the foreign exchange market in Ukraine has been commented for FinMaidan by Serhiy Chernenko, FUIB's Chairman of Board.

December 09, 2014, Tuesday

The National Bank is concerned about the rise in price of dollar and expects from the bankers that they will keep the rate, which has already been exceeded by the quotes in the cash market at up to 16 USD/$. Market participants believe that under the conditions of foreign currency shortage no one can promise for a long time even a conditional stability of the currency market, but they note that there are no serious factors of hryvnia devaluation up to the end of the year.

Dollar is asked to stay

The dollar went beyond the upper limit of the conditional exchange rate corridor of 15-16 UAH/$, which banks have promised to NBU to keep a month ago. On Monday morning, in the cash market more than a hundred of Ukrainian banks set the selling rate of the US dollar at the box offices and exchange offices at the level above 16 USD/$, most of them at the level of 16.17 USD/$, but there were even higher quotes.

Therefore, during the weekly Monday's meeting with bankers, NBU management tried once again to persuade lending institutions to adhere to these agreements. The head of the NBU Valeriya Hontarieva reminded the largest banks of the request not to raise the value of the American currency above 16 USD/$, participants of the meeting told FinMaidan. Cash market will react to the wishes of the head of the regulator only in the morning. And in the interbank market a slight strengthening of the has already happened. The average weighted value of dollar has dropped from 15.5 USD/$ to 15.37 USD/$.

It was only a verbal intervention, NBU has not promised to increase the sale of foreign currency. The last time the National Bank gave instructions to the banks to keep the exchange rate was in September when it was fixed at around 12.95 USD/$, and this level was held for nearly two months. National Bank spent $1.3 billion from the reserves on interventions to support the rate. Now the regulator has no possibility to maintain the hryvnia: In November, international reserves fell to the lowest point in 10 years, at $ 9.97 billion.

No-influence measures

Bankers believe it is impossible to hold the rate in a difficult economic situation. Bankers said earlier to FinMaidan, that the prices, at which the currency transactions are brought to ValCli, are not actual transaction prices.

On the eve of the visit of the IMF mission, whose work will begin today, the National Bank does not apply, and even does not promise new administrative measures to prevent further devaluation. It merely extended the restrictions on withdrawals of funds from foreign exchange deposits and accounts in the volume of 15 thousand UAH per day in equivalent. The obligation to sell 75% of foreign exchange earnings within 90 days has been extended for another three months.

Bankers see no possibility to compensate for the currency deficit in the interbank market, which was caused by paralysis of the Donbass. "About 25% of exports fell to the eastern region, where military actions are currently held. Only because of the stop of Alchevsk Iron and Steel Factory the currency sales decreased by $500 million, Serhiy Chernenko, FUIB's Chairman of the Board, says. That is why, we had previously a daily turnover in the interbank market of about $1 billion, and now we have only $180-200 million".

Going beyond

However, bankers expect that even if the rate exceeds the level of 16 UAH, it will be insignificantly. "There is a significant shortage of cash and non-cash hryvnia in the market now, and the shortage will only increase by the end of the year. It is mainly triggered by the following seasonal factors: increase in business activity at the end of the year, payment of salaries, tax deductions. Already, the non-cash hryvnia is worth about 40-50%, the price of cash hryvnia for the load of cash desks rose to 0.1-0.15%, and will continue to go up in the near future, one of the bankers warns. This situation will continue until the end of the year. During this period, I do not see threats to the devaluation of the hryvnia. The rate will be in the fluctuation margin of 15.8-16.15 UAH/$. The subsequent behavior of the national currency will depend on many factors, and most of them are political in their nature."

Source: FinMaidan

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