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Ukrsibbank Research: FX and interest rates: UAH touched thee-year high vs USD

August 01, 2019 | Cbonds

The hryvnia has tested 25 key level against the greenback in spite of substantially increased foreign currency (FX) purchases by the National bank of Ukraine (NBU).
As before, the local currency derives support mainly from growing inflow of fresh FX from non-residents, actively investing in UAH-denominated government bonds. This week the Finance Ministry has placed securities on UAH17.2bn (USD0.69bn), of which UAH10.9bn (USD0.43bn) were 5.5y bonds popular among non-residents. It would be fair to expect that similar amount of FX has come on the market.
The NBU has increased interventions on the market to above USD100mn per day since beginning this week, but these purchases had limited impact on the general trend. Despite growing complains in the market about central bank’s insufficient activity, allowing for UAH to grow above 25 vs USD instead of boosting FX reserves, the NBU stays firm on its strategy not to influence the general trend while to pick up only excess supply of foreign exchange.
By the end of Wednesday (July 31) the UAH/USD pair has rebounded below 25 mark. It looks like market participants are reassessing their expectations of how long lived might be current interest of foreign investors to Ukraine, and how high the hryvnia may climb against the greenback.
While such an unparalleled appreciation poses a substantial risk of no less strong correction, there are some positive expectations in the market that it might be manageable if promised reforms be delivered.

Company: UkrSibbank

Full company namePJSC "UkrSibbank"
Country of riskUkraine
Country of registrationUkraine
IndustryBanks

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