The NBU has a sufficient amount of international reserves to meet additional demand in the first days after the introduction of a flexible exchange rate.
The National Bank noted an increase in net demand for currency on the first day of the transition to a regime of managed exchange rate flexibility and expects it to stabilize in the following days as the market adapts to the new conditions. This was announced by the Deputy Head of the NBU Sergei Nikolaychuk.
“My personal assessment is one week, maximum two,” he said at Business Breakfast with Forbes Ukraine.
According to Nikolaychuk, the time frame may be longer due to negative news, “including the spread of panic in the media, on Facebook.”
He added that some currency sellers decided to stop selling on the first day to see how the situation would develop, as buyers grew up, testing the new system.
As Nikolaychuk said, the central bank is prepared for such a situation and has a sufficient amount of international reserves to meet additional demand in the first days after the introduction of a flexible exchange rate.
“Therefore, nothing violent has happened which is seriously beyond our expectations,” he said.
Nikolaychuk believes that in the coming days this net demand will slowly disappear as market participants get used to the new reality.
He also confirmed estimates that the population’s demand for currency has increased by about a third due to the announced transition to a regime of managed exchange rate flexibility.
“In fact, the population’s demand for money has also increased in the cash segment, in the non-banking market, and we have also received information from banks that the purchase of money through the non-cash sale mechanism has increased compared to the previous days,” he noted.
According to the deputy head of the NBU, the reaction of the cash exchange rate on October 3 was fully included in the expectations of the National Bank.
“At first the rate was reduced by 20-30 kopecks, but then somewhere in the middle of the day, when the population realized that, in principle, the rules of the game have not changed, the situation in both interbank markets is stable , the rate remained close to the official, which on Monday and was fixed on Tuesday, the trend was reversed. And most of this weakening that occurred in the first half of the day, the cash rate won,” he said.
Nikolaychuk added that the further actions of the National Bank in the monetary sphere depend greatly on the reaction of the foreign exchange market. The base scenario of the NBU describes the stabilization of the demand for money after a short-term disturbance, after which it will be determined by fundamental factors.
“And, accordingly, we will be able to continue the cycle of monetary policy easing,” summed up the deputy head of the NBU.
Let’s recall that on October 3, the National Bank, after abandoning the fixed exchange rate, for the first time since July 2022, established a new dollar exchange rate based on the results of trading in the interbank foreign exchange market.
Source: korrespondent
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