Ukraine hryvnia finds new low as bankers “agree” on new ForEx rate

National Bank of Ukraine Head Valeriia Gontareva met with bankers on Oct. 10 to discuss the situation at the ForEx, where the Ukrainian hryvnia devalued 13 percent in the previous two trading sessions. The meeting’s participants agreed to keep the hryvnia exchange rate in the range of UAH 15-16 hryvnia/USD, reported the Interfax-Ukrayina news agency. They also agreed that no new administrative measures will be applied if the dollar rate maintains that level, Interfax reported. By the end of trading session, the dollar traded at the interbank exchange for UAH 15.4-15.9.

Alexander Paraschiy: This move resembles the NBU’s stabilization attempts at the end of September, when bankers agreed to keep the national currency at UAH 12.95/USD. A is apparent, the effort failed, costing the NBU USD 1.2 bln to preserve “stability” at this level throughout October. This time, monetary authorities hope the new level of the exchange rate will be enough to neutralize excessive demand for foreign currency.

However, the attempt to stop devaluation at UAH 15-16/USD isn’t totally secure in light of poor confidence in NBU policy and likely continued hryvnia printing for budget deficit funding. In our opinion, unless significant monetary tightening starts, devaluation pressure will resume quite soon. At the same time, there is a high chance that this pressure will be short-lived.