Ukraine central bank resumes FC purchases amid hryvnia decline

The National Bank of Ukraine (NBU) resumed on Nov. 26 its foreign currency purchases, acquiring at auction USD 2.8 mln at an exchange rate of UAH 23.45/USD, Interfax reported. Prior to that, the NBU had been selling at the ForEx in response to recent volatility. On Nov. 23, the NBU sold USD 18.1 mln and on Nov. 24, it sold USD 10.7 mln. A week before that, the NBU sold USD 54.8 mln. Starting October, the hryvnia was under significant pressure at the ForEx. Since Oct. 1, the hryvnia has weakened from near UAH 21.3/USD to UAH 23.6/USD as of Nov. 26.

Alexander Paraschiy: Stronger pressure on the hryvnia at the year end is what we expected initially. The tendency is not dangerous, as we expect no currency shock, but gradual hryvnia weakening will continue in the upcoming months owing to accelerated budget spending, as well as a widening external deficit. The delayed IMF support only supported depreciation sentiments. The NBU has made it clear it will not strongly intervene to defend the national currency, though it will continue to intervene to prevent extreme volatility at the market. By the year end, we expect the hryvnia rate to be close to UAH 24/USD at the ForEx.