NBU’s foreign currency reserves increase 1% m-o-m in August

The National Bank of Ukraine’s foreign currency reserves grew by 1.04% m-o-m to USD 38.2 bln, according to adjusted data released recently. The reserves have risen by USD 3.6 bln or 10.5% YTD. Svetlana Rekrut: The NBU attributed the growth to increased interbank USD supply stemming from non-resident capital inflow exceeding outflow by USD 1.7 bln. The August data is more positive than expected given the 22% decline (~USD 250.0 mln) in non-resident holdings of UAH government bonds and increasing devaluation expectations related to global financial instability. We think the NBU will continue to keep the UAH/USD exchange rate stable at 8.0 rate at least until yearend and the NBU’s reserves to stay at USD 36.0 bln at end-2011.