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The NBU explained why the demand for foreign currency jumped by 40%

Photo: NBU Press Center

The average daily volume of NBU foreign exchange intervention increased to $134 million in May compared to $104 million in April and $86 million in March.

In May, net customer demand for foreign currency through non-cash transactions increased by 41% due to an increase in budget expenditures, which is related to international aid receipts in March-April. Interfax-Ukraine reported this in connection with the regulator’s comment on Wednesday, June 5.

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“In addition, in the last week of May, significant surge situations in the demand for money were observed, which affected the exchange rate dynamics,” the statement said.

According to the National Bank, exchange rate dynamics were also affected by the expiration in mid-May of the period when two deadlines were imposed for the settlement of agricultural exports. Against the backdrop of last year’s crop failure, it reduced the supply of foreign currency.

“Such a change in market conditions – increased demand for money with a simultaneous reduction in supply – led to a corresponding weakening of the hryvnia exchange rate. For its part, the National Bank covered the structural deficit of foreign currency and eliminated excessive exchange rate fluctuations,” explained the regulator.

It was noted that the average daily volume of foreign exchange interventions by the regulator increased to $134 million in May compared to $104 million in April and $86 million in March.

The NBU states that the situation in the foreign exchange market remains stable and controllable, and the level of international reserves is sufficient to maintain the stability of the foreign exchange market.

The Central Bank emphasized that further dynamics of the exchange rate will be determined, first of all, by changes in the balance of supply and demand for foreign currency.

“It is important for the NBU to maintain such a connection between the dynamics of the exchange rate and changes in market conditions. ,” assured the National Bank.

The regulator added that since switching to managed flexibility mode, operations without the participation of the regulator have more than tripled, and their share has more than doubled.

The National Bank believes that progress in deepening the foreign exchange market and strengthening the ability of the exchange rate to adapt to internal and external shocks will increase the stability of the foreign exchange market and the Ukrainian economy. At the same time, maintaining exchange rate stability remains an important task for the NBU.

“We are talking about such dynamics of the exchange rate that will not threaten the maintenance of inflation at a moderate level in 2024 (despite the expected acceleration) with its subsequent reduction to 5% in the horizon of the forecast of NBU,” the central bank clarified.

At the same time, the NBU noted that the significant level of international reserves, positive progress in maintaining US financial support and the successful completion of the fourth program review with the IMF at the staff level are strengthening on the ability of the regulator to ensure a controlled situation. in the foreign exchange market.

As you know, at the end of May, the official hryvnia exchange rate weakened by 90 kopecks – from 39.64 UAH/$1 to $40.5373 UAH/$1, gradually updating historical minimums every day in the last ten days of the month. In the cash market, the Hryvnia exchange rate also weakened by UAH 1.24 during the month – to UAH 41.05/$1.

At the same time, in the first week of June, the official exchange rate strengthened to 40.29 UAH/$1, and in the cash market – to 40.85 UAH/$1.


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Source: korrespondent

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